Death of a Member

Baroness Hayman: My Lords, it is with very great regret that I have to inform the House of the death of Lord Renton on 24 May. On behalf of the whole House I extend our condolences to his family and friends.

Gambling: Betting Offices

Viscount Falkland: asked Her Majesty's Government:
	What steps they are taking to place appropriate limits on the number of betting shops, particularly in inner cities.

Lord Davies of Oldham: My Lords, there are a number of new provisions under the Gambling Act 2005 that will effectively regulate the licensing of betting shops. In issuing betting shop licences, all licensing authorities must have regard to the three objectives of the Act, one of which is the protection of children and the vulnerable. The Act provides for new applicants for betting shop licences to make public their intentions. Local people will also have the opportunity to raise concerns about applications with their licensing authority.

Viscount Falkland: My Lords, I thank the Minister for that full Answer. Does he agree that the situation needs very careful watching? It seems unfair to criticise the bookmakers by implication after they have had such a bad weekend, but the turnover for horse racing and dog racing has fallen considerably and the main contributor to betting shop profits is what are misleadingly called "fixed-odds betting terminals", known in the trade as FOBTs. They are casino betting machines, and every betting office has four of them—the Government have seen fit to allow them to do that. They are quite separate from all other gambling in casinos, but they are casino machines. What plans are there to monitor the social impact of these machines and the profits they yield in very poor areas, which is mostly where betting shops operate with regular customers?

Lord Davies of Oldham: My Lords, I am grateful to the noble Viscount, who recognises that bookmakers have had a sorry weekend with two derby wins by the same jockey. I must report to the House that the number of betting shops has been in decline in recent years. We do not know whether there has been a very recent increase, for the simple reason that the new licensing system under the Act did not come into operation until 21 May. The Gambling Commission therefore cannot begin its process of both counting and regulating the development of bookmakers and the issues the noble Viscount refers to, but it is charged with exactly that responsibility, which we expect it to fulfil.

Baroness Gardner of Parkes: My Lords, what is the position on casino machines? There has been a major problem in Australia, particularly on licensed premises selling alcohol, which have a number of these machines. The Government there are trying to limit them, but everyone is claiming that they have the right to the machine and can take them on to their shop when they move. The machines develop an identity of their own which is quite independent of where they seem to have been situated originally. Is any similar situation likely to arise here?

Lord Davies of Oldham: My Lords, the Government and Parliament had the advantage of some knowledge of the Australian experience as we considered the Bill that became the Gambling Act 2005. There are strict regulations with regard to numbers of machines according to which premises have applied for the licence. We would not wish to see those machines in Australia, which are referred to as pokies, spread in such an unlimited way, and the Gambling Act meets the requirements of regulation.

Lord Campbell of Alloway: My Lords, is not the real problem casinos as distinct from betting shops?

Lord Davies of Oldham: My Lords, the Question is about betting shops, but in considering the casino policy and the proposals with regard to small, large and regional casinos, the Government were concerned to specify the number of machines in each category that could be operated by the licensee.

Lord Clement-Jones: My Lords, the use of FOBTs effectively turns bookmakers into mini-casinos. The Minister referred to the review and to the duty of the Gambling Commission in the future. When does he anticipate that the commission will review the use of FOBTs for the first time? Will that review also look at jackpot machines, category A machines and many of the other machines that were debated during proceedings on the Gambling Bill and gave rise to many different and conflicting views about whether more should be allowed?

Lord Davies of Oldham: My Lords, that is the responsibility of the Gambling Commission. The House will wish to be fair to betting shops, which is what the Question is about. They began to be licensed under the legislation on 21 May, only a short while ago; consequently, the Gambling Commission is not in a position to produce detailed statistics and an analysis of how it is tackling the problem. However, it is the commission's responsibility to do so in due course.

Lord Luke: My Lords, we on these Benches are very concerned about the impact on vulnerable groups of the Government's gambling liberalisation. What is the Minister's reaction to the enormous increase in the number of people using GamCare, the online advice service, in the past few years?

Lord Davies of Oldham: My Lords, the Opposition also expressed their great concern about the Licensing Act 2003 causing enormous chaos in the nation. That has not come to pass. Therefore, why should we think that the Gambling Act will have a similar effect to the one they described then? We have not seen an enormous increase in drinking habits since the passing of the Licensing Act; we have, however, seen the ability to control the development of licensing under the legislation. That applies to gambling as well. Of course we are concerned about online betting. It is one of the reasons why the Gambling Act needed to come into force, as we were aware that this new form of betting did not come under the former legislation.

Office for National Statistics: Relocation

Lord Newby: asked Her Majesty's Government:
	Whether the relocation of the Office for National Statistics to Newport can be undertaken without disruption to the production of key economic and social statistics.

Lord Davies of Oldham: My Lords, many of the key outputs of the Office for National Statistics have already been relocated from London without loss of quality. The work is moving to established offices in Newport and Titchfield, which already have a broad base of statistical skills. Risk-management strategies, which are kept under constant review, are in place to relocate the work without adversely affecting quality.

Lord Newby: My Lords, I thank the Minister for that Answer. Is he aware that the National Statistician told the Treasury Select Committee only last week that only 10 to 15 per cent of qualified statistical staff now in London are prepared to go to Newport, and that the Bank of England has warned that the current plans will have a severe impact on a range of statistics? Will the Government now review the pace of the relocation to ensure that no economic statistics are jeopardised?

Lord Davies of Oldham: My Lords, that significant economic statistics are not jeopardised is of paramount importance. I accept the noble Lord's point that the National Statistician said that only 10 to 15 per cent of staff had relocated, but it was always anticipated that there would be new appointments to these positions. More people are employed in national statistics in Newport than in London, so the move has already progressed significantly.

Lord Campbell-Savours: My Lords, is it not true that civil servants always oppose dispersal policy as a matter of course and that they are invariably wrong?

Lord Davies of Oldham: My Lords, there is certainly a general recognition in the country of the wisdom of seeking to spread jobs and economic prosperity more widely than the overheated south-east, but the moment the Government come along with a strategy for relocating jobs within their own service, there are many critics to be found.

Lord Jenkin of Roding: My Lords, the Minister accepted a moment ago that the National Statistician had told the Treasury Select Committee that 10 to 15 per cent of staff "had relocated". In fact, she told the committee that she expected only 10 to 15 per cent of staff to relocate, which the Financial Times correctly interpreted as meaning that some 700 or 800 staff of the ONS would not relocate and it would have to recruit new staff at Newport. Is the Minister not being unduly complacent about what seems to be developing into quite a serious situation for the ONS?

Lord Davies of Oldham: My Lords, no one has suggested that the relocation of the work would proceed without any difficulty at all. That is why it is being carefully phased. The noble Lord will know that the most significant posts are being held until 2010 to maximise opportunities either for people at a very senior level to move or for their posts to be advertised and replacements found. The priority must certainly be the protection of the quality of the service for which the Office for National Statistics is renowned, while achieving that other objective which the House would recognise as welcome; namely, that some functions of the Treasury—this department is within the Treasury—should be located outside London.

Lord Haskel: My Lords, did my noble friend the Minister see the article in the Financial Times this morning by Karen Dunnell, the National Statistician, in which she gave a pretty comprehensive and robust account of how the move is going? She made the point, among others, that there are now more people in Newport. I found the article pretty convincing. Does the Minister agree with me?

Lord Davies of Oldham: My Lords, it is certainly unlikely that an organ such as the Financial Times would publish an article without it having real substance, particularly given its source and the high repute of the National Statistician. She and her office enjoy a high reputation. Therefore, I commend to all her analysis of the process of relocation, because I, too, found it convincing.

Lord Oakeshott of Seagrove Bay: My Lords, if the Minister has such a high opinion of the Financial Times, will he reread rather more carefully the article about two weeks ago that expressed very serious concerns about the relocation, including those from the staff? The Minister mentioned risk-management strategy. Given that the great majority of the experts who run the cost of living statistics are not prepared to go to Newport, what exactly is the strategy to ensure that Britain's cost of living statistics are not seriously damaged?

Lord Davies of Oldham: My Lords, the noble Lord has identified a very important range of statistics whose quality we need to guarantee. When I emphasise risk assessment, what is in place is a balance between the speed with which relocation can take place and the necessary expertise being available to the office to guarantee the statistics that the noble Lord has identified. The ONS is responsible for a range of other statistics, which other Members of this House would regard as equally significant.

Baroness Noakes: My Lords, I was pleased to hear the Minister praising the coverage of the Financial Times, because last week it also reported that the Statistics Commission, which was worried about the impact of resources, including relocation, on the quality of statistics, had requested budget information from the ONS to evaluate the impact of these changes. The FT reported that that was denied. Why?

Lord Davies of Oldham: My Lords, when I praised the Financial Times, I praised an organ that provides a forum for a very important debate in this area. None of us would doubt that the moving of such a significant office from London is a matter of very great interest among all concerned with the quality of our statistics and must be managed carefully. That is why the Financial Times published an article that identified some of the challenges laid before the office in moving. As we heard from my noble friend earlier, today the Financial Times gave the opportunity to the chief statistician to indicate how she thought that the process was going—and she reported favourably in those terms.

Lord Anderson of Swansea: My Lords, some years ago there was a highly successful relocation of the Royal Mint from the Tower of London to Llantrisant in south Wales, which can serve as a model. Has there been a failure to sell the attractions of Newport, with the Usk and Wye valleys and cheaper house prices than London?

Lord Davies of Oldham: My Lords, Newport can advertise its own virtues. In addition to the city itself, which has many advantages not least in terms of its house prices in comparison to those of the south-east, Newport is located in a supremely attractive area at the southern end of the Wye valley. Of course, many people would find that attractive.

Olympic Games 2012: Allotments

Baroness Miller of Chilthorne Domer: asked Her Majesty's Government:
	Whether they will make the Olympic site an exemplar site of sustainable development; and whether any features of the current design recognise the features already on site that could be exemplars of sustainable city living.

Lord Davies of Oldham: My Lords, the 2012 Olympic Games and Paralympic Games represent a tremendous opportunity for London and the nation, regenerating one of the most deprived areas of the country. The planning and development of the Olympic Park aims not only to deliver the best Olympic Games and Paralympic Games ever but to ensure that they are socially, economically and environmentally sustainable, leaving a lasting legacy for the Lower Lea Valley and the UK as a whole.

Baroness Miller of Chilthorne Domer: My Lords, I thank the Minister for his Answer, but why has his department been unable to answer my simple Written Question of 26 April asking what the statutory duties were of the London Development Agency and the local authority to the allotment holders on the Olympic site? Is he aware how historic the Manor Garden allotments are? They were given before the First World War by a friend of Churchill's to the very people to whom the Minister refers—the people who dwell in the East End—so they could grow their own food. Could those same allotments not be a showcase for Olympic visitors? After all, what is more British than an allotment full of runner beans, apple trees and dahlias? Does he really think that the best solution is to allow them to be bulldozed?

Lord Davies of Oldham: My Lords, the noble Baroness is right to chide me for the delay in providing an Answer to her Question. I assure the House that the Answer is imminent and I think would have been delivered last week had there not been a parliamentary recess. I accept her chiding on that. On the general point, the movement of these allotment holders is to be regretted, but it is forced on us by the nature of the planning of facilities in the Olympic Park. However, we have set out to provide temporary locations for the allotments elsewhere in the mean time, and we will restore the right of all allotment holders to have an allotment in the Olympic Park when it is completed.

Lord Clark of Windermere: My Lords, is my noble friend aware that the horticulture, timber and forestry industries have had meaningful discussions with the Olympic authorities in London to ensure that there are a lot of exciting green aspects to the 2012 Olympics, including an Olympic forest and a green area which will leave a green legacy for the east of London? I declare an interest as chair of the Forestry Commission.

Lord Davies of Oldham: My Lords, I am grateful to my noble friend for that contribution, which comes with his great knowledge on these issues. We have stated all along that a sustainable environmental legacy is a crucial part of the Olympic legacy. He has identified the amount of work that needs to be done and the amount of consultation that is necessary with interested bodies to achieve the objectives to which we all subscribe.

Lord Naseby: My Lords, does the Minister recall that, on 1 May, I asked a Question about whether there was to be any form of roof structure to protect the public from the rain in the stadium? At that point he said that there was to be a meeting in three weeks' time, when all matters would be reviewed. Can he now inform me whether there is to be some form of roof structure to prevent the British public being totally soaked?

Lord Davies of Oldham: My Lords, it is not the British public—we hope that it will be a worldwide audience for the Olympic Games, and they all need protection. I cannot give the noble Lord details now, but he is right that the issue of a stadium roof is of considerable importance. I can assure him that it was never intended that there should be no protection at all from the weather in the stadium. As I recall from last time, he was not too sure that the people who deserved to be protected were necessarily the ones who were likely to get the cover.

Baroness Sharples: My Lords, how many allotment holders are affected by the temporary move and how long will it last?

Lord Davies of Oldham: My Lords, the period will last until the Olympic Park is free of its commitment to the Games in 2012, so it will be more than four years before the allotments come back. I think that there are just over 70 allotment holders.

Baroness Thomas of Walliswood: My Lords, can the Minister assure us that when the allotment holders are obliged to move, it will not be in, say, June, half way through the vegetable growing season, but at a more suitable time?

Lord Davies of Oldham: My Lords, my experience of all allotment holders, and certainly of the group involved in this issue, is that they can well look after their own interests. One of my inhibitions about replying now is that there is currently a court case in which the allotment holders are taking the department to court. The House can be reassured that their interests are being looked after.

Lord Brooke of Sutton Mandeville: My Lords, to offer the Minister some small assistance, is he aware that Prince Albert intervened in the case of the vegetable gardens on what is now Kennington Oval and prevented them being turned into houses? It does not seem to have done Kennington Oval much harm.

Lord Davies of Oldham: My Lords, neither Kennington Oval nor the reputation of Prince Albert.

Iraq: HMS "Cornwall" Inquiries

Lord Craig of Radley: asked Her Majesty's Government:
	Whether the two inquiries set in hand by the Secretary of State for Defence on 16 April following the seizure of Royal Navy and Royal Marine personnel by the Iranian authorities on 23 March have been completed.

Lord Drayson: My Lords, first, I am sure that the whole House will wish to join me in offering sincere condolences to the families and friends of Corporal Darren Bonner, Corporal Mike Gilyeat and Guardsman Daniel Probyn, who were killed during operations in Afghanistan over the Recess.
	Lieutenant-General Fulton has completed his report on the operational issues and has presented it to the Chief of the Defence Staff, who is considering it. The review into media access being led by Tony Hall is due to be completed shortly, and I expect an announcement to be made to Parliament on both later this month.

Lord Craig of Radley: My Lords, I thank the Minister for that reply. I add my condolences to the families of the soldiers whom he mentioned.
	In his Written Statement about setting up these inquiries, the Secretary of State said that an incremental return to full boarding operations in all areas will take place. Are they now taking place? Will the Minister remind the House why it is necessary for boarding parties to undertake these operations, which have a serious restriction on free passage? Given the evidently limited expertise of those involved in the boarding operations, is this a better way of finding out whether there is contraband cargo than examining ships when they dock? Has General Fulton's inquiry established whether the risks involved in boarding are supported by excellent or very good results?

Lord Drayson: My Lords, I can inform the House that the Royal Navy recommenced boarding operations in the Gulf on 23 April 2007. These boarding operations are very important. Considerable smuggling is taking place in the region. It is important for these operations to take place to ensure that this smuggling is reduced. These anti-smuggling operations are done under the auspices of UN Security Council Resolution 1723. The noble and gallant Lord highlighted the assessment of the risks of such boardings in the area. These are within the remit of the inquiry that Lieutenant-General Fulton has undertaken.

Lord Soley: My Lords, can my noble friend reassure me that following these reports the Government will give very careful thought to the training needs of our service personnel because, particularly in areas of trouble and where there are either tyrannical or fragile states, it seems inevitable that it will become increasingly common for our service personnel to be used in propaganda films and as hostages? The nature of the training required for all our service personnel in those areas to deal with that is profoundly important. That should be one of the lessons to be learnt from this. I hope that my noble friend can reassure us about that.

Lord Drayson: My Lords, I am grateful to my noble friend. He is absolutely right that training for after capture is considered under the inquiry. Lessons that need to be learnt in that area will be implemented. The Navy has already taken certain actions to ensure that proper training is given to all personnel engaged in operations.

Lord Astor of Hever: My Lords, these Benches also send our condolences to the families of the three soldiers whom the Minister mentioned. We are entirely satisfied with the setting up of the Fulton inquiry but have concerns about the second inquiry. Is the Minister satisfied that this inquiry will be able to name those responsible for the disastrous decision to sell the stories, whether they be in the Royal Navy, MoD public relations civilian staff or, indeed, Ministers?

Lord Drayson: My Lords, as both the review and the inquiry will be published shortly I do not think that it would be right for me to comment on their conclusions or the actions which will be taken as a result. However, I can say that we will publish in full the report of the media access review. Therefore, there will be a full opportunity to debate any lessons which need to be learnt as a result.

Lord Garden: My Lords, these Benches also add our condolences to the families of the three soldiers killed in Afghanistan. Last week was a difficult week for the multinational forces in general both in Afghanistan and Iraq. It is very heartening that the Fulton inquiry has reported so quickly, given that it comprised just Lieutenant-General Fulton and his major. It was an unusual process. Do we now expect to have a formal board of inquiry so that evidence may be taken in the normal way and that those who may be criticised for what happened will have a legal basis on which to defend themselves?

Lord Drayson: My Lords, we need to see the outcome of the inquiry. Both the Defence Select Committee and a group of noble Lords will have the opportunity to scrutinise the inquiry on a confidential basis; in this House the group will be under the chairmanship of my noble friend Lady Dean. I am not aware of decisions having been taken on the process following the Fulton inquiry. The noble Lord, Lord Garden, is absolutely right that this is an unusual process, but it was done to enable us to carry out the inquiry much more quickly than would otherwise have been the case, had we gone through a formal BoI. I believe that the House believes that to have been the right decision, but of course we will have to make sure that full opportunity is provided to all personnel concerned relating to any consequences of the Fulton inquiry.

Lord Morris of Aberavon: My Lords, without anticipating the conclusions of the inquiries, will the terms include whether there was adequate ministerial cover on those fateful days when the decisions were taken regarding publication? Will the inquiry deal with whoever took the decisions?

Lord Drayson: My Lords, I have nothing further to add to the statements that have been made, setting out in full the terms of reference for both inquiries, and the fact that the inquiries were set up immediately and were given a very clear and broad remit covering both the operational aspects, which were of fundamental importance, and the media handling where there are clearly lessons to be learnt. The terms of reference have been set out. We will be reporting on the outcomes of the reviews very shortly, and then we will have a full opportunity to debate any consequences.

Lord Lawson of Blaby: My Lords, is it not an important principle of our parliamentary democracy and of ministerial responsibility that, whatever the circumstances of the decision to allow those people to sell their stories to the press, it is the Minister who is responsible? There is no way that that can be got away from.

Lord Drayson: My Lords, I believe that my right honourable friend the Secretary of State made it crystal clear in his Statement to the other place that he takes full responsibility for all the actions of the Ministry of Defence, including in this case.

Victims of Overseas Terrorism Bill [HL]

Read a third time; an amendment (privilege) made; Bill passed, and sent to the Commons.

Pensions Bill

My Lords, I beg to move that the House do now resolve itself into Committee on this Bill.
	Moved accordingly, and, on Question, Motion agreed to.
	House in Committee accordingly.
	[The LORD SPEAKER in the Chair.]
	Clause 1 [Category A and B retirement pensions: single contribution condition]:

Lord Oakeshott of Seagrove Bay: moved Amendment No. 1:
	Clause 1, page 1, line 13, leave out "2010" and insert "2008"

Lord Oakeshott of Seagrove Bay: Here we are again at the Committee stage of a pensions Bill. I welcome the noble Lord, Lord Skelmersdale, who, with me, was a veteran of the 2004 Bill. I speak as a player in an enthusiastic and talented string quartet that consists of my noble friends Lady Thomas, Lord Kirkwood and Lord Addington.
	We on these Benches would have preferred these proceedings to have taken place in Grand Committee. This Bill will raise strong emotions and involve Divisions, but given that much technical work is needed, a Grand Committee would be a better forum for achieving consensus and for probing, particularly due to the way that the committee rooms are laid out. The Committee stage of the previous Pensions Bill was taken off the Floor of the House. It would have been easier to consider this Bill in that way because officials would have been able to be there with the Minister and many issues might have been resolved immediately, rather than going backwards and forwards. The Welfare Reform Bill worked better in that way, although some proposals were contested and major changes were made at Report. In addition, I have a pile of papers that would have been easier to deal with in the Moses Room. Those are serious points regarding the correct way of conducting our business and I hope that in the future we will think long and hard as to whether it is right to consider a Bill in Grand Committee or on the Floor of the House.
	Moving on to this important Bill, we start with the issue of reducing from 39 to 30 years the period that people have to work in order to qualify for a full state pension. This is most relevant to women. Helpful background figures from Age Concern show that 17 per cent of single female pensioners live in poverty, that only 24 per cent of newly retired women are entitled to a full basic state pension in their own right and that some 40 per cent of women who are employed part-time say that their employer does not have a pension scheme, compared with 25 per cent of women in full-time employment. I am grateful for the briefing given by the National Pensioners' Convention, Tony Lyons and Help the Aged, in support of our amendment.
	Under the Government's proposals, there will be an inevitable cliff edge in 2010. As I said at Second Reading, we on these Benches believe that a citizens' pension should be payable to all, as of right. If that were the case, this sort of problem would not arise, but, meanwhile, we must make the best of the current situation. We invite the Minister to discuss this issue, and although we recognise that it would be very expensive automatically to apply a 30-year rule, rather than a 39-year rule, to everyone now, it would be affordable and sensible to bring forward the cut-off point to 2008. That would save a number of people from that cliff edge. I beg to move.

Baroness Greengross: I speak to my Amendment No. 5. The provision for gender impact assessments under the public duty to promote equality is welcome, and I congratulate the Government and the DWP as first department to make that provision. I also welcome very much recognition of the caring role as counting towards the 30-year qualification but, unless this is made retrospective, there will be stark inequalities between people with identical contribution records. The figures available to me—the noble Lord, Lord Oakeshott, referred to correspondence from Age Concern, Help the Aged and other bodies—suggest that this could be as much as £1,000 a year at current pension rates.
	We know that the situation of today's pensioners remains acute: two-thirds of those in poverty are women; 40 per cent of eligible people are not taking up pension credit; and 47 per cent of people eligible for council tax benefit are not taking it up. Although, overall, the Bill will mean that outcomes between men and women converge, the Pensions Policy Institute, of which I have the privilege to be president, estimates that that will not happen until 2050. By then, the projected number of people of state pension age or older will amount to 25 per cent of the population, as opposed to 19 per cent now.
	In Committee in the House of Commons, the Minister said that the cost of making the 30-year requirement retrospective would be extremely expensive. The cost is estimated to be about £1 billion, yet the Government estimate that £4 billion will be saved by ending contracting-out rebates. The estimate of the value of unpaid childcare by grandparents is £220 billion and that of carers is £57 billion. In that context, how can the Minister say that £1 billion to address a significant unfairness is extremely expensive? The Government seem content to exploit the good will of families but are unwilling to give back this relatively small sum.
	We know that longer life expectancy, together with changing family structures, relationships and interdependencies, requires greater recognition and greater commitment from the Government. In correspondence that I have received, concern has been raised that the current method of each year deducting home responsibilities protection from a woman's target working life of 39 years makes a current HRP year mathematically less valuable than a year of home responsibilities payments for women retiring from 6 April 2010 onwards. Something needs to be done and I hope that the Minister will respond favourably.

Lord Skelmersdale: My amendment in this group is intended to explore the extent of the analysis relating to the decision to improve the coverage of the full state pension. However, before I do that, like the noble Lord, Lord Oakeshott, I want to say a few words. First, as a former micro-member of the usual channels, I am well aware that it is necessary to have a balance between Committee stages taken in the Chamber of your Lordships' House and those taken off the Floor of the House. The fact that previous pensions, welfare or national statistics Bills have been held in one or the other is of no consequence as regards precedence.
	Secondly, as I said at Second Reading, there is a large measure of consensus between us and the Government on the Bill. However, as usual, problems arise due to what is not, rather than what is, in the Bill. Most of the amendments in the Marshalled List for this Committee stage relate to the category of what is not in the Bill.
	In speaking to my amendment, I start by making a purely probing comment. The reform in the Bill relating to state pension age has been widely welcomed and we on these Benches fully support it. However, we should take care that the Bill does not promise what cannot be delivered. It is in everyone's interests, especially those who hope to receive a full state pension, that the extra cost to the taxpayer of reducing the required amount of national insurance contributions is affordable and that phasing in the new requirements is done fairly, smoothly and with the least possible amount of confusion.
	As I understand it, the only information in the public domain, as the noble Baroness, Lady Greengross, mentioned, is in the regulatory impact assessment, which explains why the whole package of reforms that the Bill introduces will raise spending on pensions from 5.1 per cent to 7.3 per cent of gross domestic product. As we shall no doubt hear in Committee, that is still considerably less than is spent on state pension provision in other European countries. However, the increase will still have to come from somewhere and it will be necessary either to increase taxes or to reduce public expenditure in other areas. I would be interested to hear from the Minister which route the Government intend to take. If it is the latter, are there any particular savings that they have in mind already? My noble friend, Lord James, spent many months discovering many such savings when he produced his excellent report. However, the Government are hell-bent on increasing expenditure, not least in the areas of health and education, with little obvious benefit.
	There are also administration costs. A total of £192 million is expected to be spent on adjusting the pension systems to the new conditions. The Government have an unfortunate record in introducing large scale administrative reform, especially where complex computer systems are involved. The report that this amendment hopes to provide would highlight any unrealistically optimistic predictions and would also be extremely valuable should the estimates not prove to be accurate. Therefore, I look forward to hearing the Minister's response.
	I find the suggested timetable of 2008 in the amendment in the name of the noble Lord, Lord Oakeshott, rather optimistic. Although we on these Benches fully support the Government's intention to reduce the required contributions to 30 years, I do not think it is feasible to introduce such change in so short a time.

Lord McKenzie of Luton: I very much welcome the opportunity in Committee to debate the detail of a Bill that has been widely welcomed. I welcome contributions from veterans of past pensions debates and newcomers, such as myself and my noble friend Lady Morgan. We are happy to engage with Members in Grand Committee or on the Floor of the House—whatever the usual channels determine.
	Amendments Nos. 1, 5 and 6 all concern the keystone of our state pension reforms: namely, that to qualify for a full basic state pension there will be one single 30-year contribution condition. These amendments raise three important points: first, why the Government have chosen 2010 as the introductory year for the 30-qualifying-year condition; secondly, why we do not propose to apply the change to both existing and future pensioners; and, finally, why we do not intend to phase in this reform.
	In responding to these important questions, I begin by saying that Clause 1 addresses the inequality of state pension outcomes for men and women. It will bring forward the improvement in women's outcomes in particular, with almost three quarters of all women reaching pension age in 2010 receiving a full basic state pension.
	Moreover, from 2025 the proportion of women reaching state pension age with a full basic state pension will, for the first time, equalise with men at over 90 per cent. Without these reforms only around 75 per cent to 80 per cent of people would be entitled to a full basic state pension by then. It surely must be the case, though, that when changes are made a line has to be drawn somewhere. To bring that line forward from 2010 to 2008, as the noble Lords, Lord Oakeshott and Lord Kirkwood, propose, would substantially increase costs, jeopardising the overall affordability of the reform package. The estimated additional net cost would be around £50 million in 2008 and around £150 million in 2009.
	Those additional costs would persist well into the longer term, so it is worth considering the practicalities. It would be impossible to bring these measures forward to 2008 because of the lead time required to make changes to both the pensions' computer system and the NIRS system. The lead time is at least 18 months. The noble Lord, Lord Skelmersdale, chided the Government on their performance on changes to computer systems. Having the proper lead time is the key to this working effectively. That lead time is similar to lead times for changes to systems in the private sector. We cannot undertake detailed design work until we receive Royal Assent, so we look forward to co-operation from Members on all sides of the Committee to get that as soon as we can. So, even putting costs aside, the earliest that the change could realistically be implemented is 2009, and the more complex the change—for example, phasing it in—the more challenging it would be.
	As Members of the Committee know well, there has been much debate about the cliff-edge effect of this measure, about which I wish to say a little more. I should begin by saying that bringing forward the introductory year to 2008, as proposed the noble Lord, Lord Oakeshott, would not resolve the cliff-edge effect, but would simply move the line so that it would apply to a different group of people.
	In response to the amendment tabled by the noble Lord, Lord Skelmersdale, and the noble Baroness, Lady Noakes, I acknowledge that there is much to be said for phasing in major changes in policy in order to graduate the effect whereby people are treated significantly differently on either side of a seemingly arbitrary line. That is exactly what we would have done, were there not overwhelming reasons for making these changes with full effect from 2010.
	It is inescapable that the benefit of this measure is optimised if we introduce it in one hit. We are determined that these measures benefit the maximum number of people. I accept that if we were to smooth the reduction in qualifying years to 30 over a period of a few years, there would be a less stark change in outcomes either side of A-day. However, it would also mean that fewer people would benefit overall and, moreover, the critical cohort of women aged over about 45 today—who we have identified as being in particular need of help—would be most disadvantaged by such a phasing arrangement.
	I assure noble Lords that we have explored options for mitigating the cliff edge either side of 6 April 2010, but we have concluded that no option provides an acceptable solution. The options are either unfair in principle or they introduce unwelcome complexity or are simply unaffordable. We believe that there are two realistic ways that this reform could be structured so as to smooth the differences in outcomes.
	First, we could introduce the single contribution condition more slowly with a phased transition starting with 38 qualifying years for women and men in 2009 and reducing qualifying years in one-year steps to reach 30 in 2017. This would smooth the introduction of the reform, but would make the gains for women reaching pension age from 2010 to 2016 less generous. As a result, around 65,000 fewer people would miss out on a full basic state pension and some 45,000 of them would be the women for whom the reform is most needed.
	Secondly we could make the measures retrospective, as the noble Baroness, Lady Greengross, suggested. I have some sympathy with this view as it seeks to improve the situation of today's and tomorrow's pensioners and would create a level playing field for those reaching state pension age either side of 6 April 2010, which is the point at which the single contribution condition in Clause 1 comes into force. On the face of it, the noble Baroness's amendment could increase the amount of basic state pension paid to some existing pensioners and its effect for those reaching state pension age from 2010 would be similar to that of Clause 1, and would therefore make it unnecessary.
	However, I should say to noble Lords that while there is admirable intent behind the idea of retrospection, we should be aware that such an amendment would not be affordable and would not necessarily achieve improved outcomes for all. The cost of introducing the proposals for all pensioners is extremely high: at least £1 billion in 2010. The noble Baroness, Lady Greengross, asked why we do not use the savings from the abolition of DC contracting out to pay for it. Over recent months, we have seen a number of references to the so-called savings from the rebate being used.
	I should make it clear up front that the abolition of contracting out for defined contribution schemes will not produce savings as such. While abolishing the DC rebate reduces costs in the short term, of course there is a broadly equivalent increase in future spending on the state second pension.
	On retrospection costs, this does not take into account substantial additional expenditure on administration—a matter the noble Lord, Lord Skelmersdale, was interested in—tied to the reassessment of cases. A retrospective approach would require the Pension Service to reassess the pensions of more than 2 million current pensioners in one go. It would do little to improve outcomes for the poorest pensioners, many of whom would be no better off because it would simply displace money they receive through pension credit. Indeed, some could end up worse off because they could lose entitlement to a range of passported benefits, such as housing benefit and council tax benefit.
	I am sure noble Lords will agree that this is a huge amount of work, which in many cases would achieve little or no overall gain. I am certain that it would also create confusion and uncertainty among today's pensioners.
	I draw attention to the letter that James Purnell, the Minister of State for Pension Reform, published in the other place. That letter is reproduced in the information pack made available to your Lordships. It sets out a number of the phasing options that we have considered but rejected for the reasons I have set out.
	To sum up, it is neither affordable nor realistically practicable to bring forward the introduction year for the 30-year single contribution condition to 2008. That also holds true for applying 30 qualifying years for a full basic state pension to all pensioners—today's and tomorrow's. And a phasing scenario does not provide an acceptable solution. It does not meet the Government's key tests for reform based on fairness, simplicity and affordability—tests which the noble Lord, Lord Skelmersdale, said he was supportive of. Rather, we believe that 2010 is the most logical time to introduce these changes, not least because that is when the state pension age for women begins to rise. People reaching pensionable age before 2010 will do so in a different scheme where different rules apply. For example, women benefit from a lower state pension age and the age at which people become eligible for pension credit is 60.
	I hope this explains why the Government have chosen 2010 as the point to draw the line for the new single contribution condition. I therefore urge the noble Lord to withdraw his amendment.

Lord Skelmersdale: Before the noble Lord, Lord Oakeshott, and the noble Baroness decide whether to pursue this matter, I very gently invite the Minister to consider the fact that it is inappropriate to use the phrase "A-day" in connection with this Bill. "A-day" has a particular connotation in pensions' activities, and one in which the Government did not come out covered in glory. Can we please use a different phrase?

Lord McKenzie of Luton: The point is noted. I will ensure that my notes are correspondingly changed.

Lord Oakeshott of Seagrove Bay: I thank the Minister for his reply and those who have spoken with varying degrees of sympathy on our amendment. I am bound to say that the more I listened to the Minister's reply to the noble Baroness, Lady Greengross, the more sympathetic I became to her amendment and the less persuaded I was by the excuses.
	The Minister is rather going in for overkill. If it is not practical because of computer problems—and I hear the noble Lord, Lord Skelmersdale—to do it, that is an end of the matter. The cost issue is neither here nor there if it cannot be done. He cannot have it both ways. He should decide which the answer is.

Lord McKenzie of Luton: Both are true. It is not affordable, and, even if it were, it would not be practical to do it at the date the noble Lord suggests. Both are true. There is nothing wrong with that.

Lord Oakeshott of Seagrove Bay: As a matter of policy, if the Government are not prepared to spend the money on it they should say so clearly. It is rather academic whether in practice it could be done if you are not prepared to spend the money on it.
	I sympathise with the amendment of the noble Lord, Lord Skelmersdale, and if he wishes to press that further in due course we will support him. This highlights the complications that are inevitable when one tries to draw a line that is exceptionally difficult to draw in an increasingly threadbare and broken down contribution system, which is, frankly, well past its sell-by date. Before I withdraw the amendment, will the Minister be a little more specific about the cost? He quoted £150 million in 2008 and £150 million in 2009, and said that that would last well into the longer term. I think that the cost begins to run off fairly quickly through the teens; I wonder whether he could give us a little more information.

Lord McKenzie of Luton: From recollection—I will check my notes—I thought that it ran through to something like 2030, but I will come back to the noble Lord on that. It is quite a significant run.

Baroness Greengross: I took quite a lot of encouragement from the Minister, because he responded quite warmly to my suggestions. I simply implore him to look again at the costs involved, before we come back to the matter on Report, to see whether there is anything that he can do. He did speak very encouragingly, and I hope that he will take the message away and reconsider the matter.

Lord Oakeshott of Seagrove Bay: I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Thomas of Winchester: moved Amendment No. 2:
	Clause 1, page 2, line 32, at end insert—
	"(5) Should the contributor have reached the state pension age and not made the necessary National Insurance contributions or accrued the necessary credits for entitlement to the full Basic State Pension, the contributor may defer claiming the Basic State Pension and may continue to pay National Insurance contributions until the entitlement to a full Basic State Pension has been accrued."

Baroness Thomas of Winchester: Amendment No. 2 would allow people who are still working and have reached the state pension age but have not made enough national insurance contributions or accrued enough credits to entitle them to a full basic state pension to defer claiming the basic state pension and to continue to make NI contributions until entitlement to a full basic state pension has been accrued. At present, a person who is still working and who has reached the state pension age cannot opt to pay NICs in order to increase their state pension. Giving someone who wished to continue to work after reaching the state pension age the entitlement to continue to pay national insurance contributions would mean not only that they would accrue credits towards the basic state pension, but that they would also accrue vital credits for the state second pension, a particularly important entitlement for women.
	The Pensions Minister in the other place indicated that bringing in a system such as the one proposed in the amendment would create great complexity both for employers and employees. He also said that the system would inevitably lead to overpaying and the issue of refunds, which has a familiar ring to it. However, would it really be too complex for businesses to cope with? After all, many payroll schemes cope with additional voluntary contributions to private pension schemes. More and more employees want to work beyond state pension age, and to deny them the right to make national insurance contributions in order to build up an entitlement to the full basic state pension and the state second pension does not acknowledge this developing trend in employment. Obviously the reduction in qualifying years for the basic state pension from 39 for women and 44 for men to 30 years for both is extremely welcome; it will certainly increase women's entitlement to the basic state pension. However, to accrue the Government's income target of £135 a week, which is a combination of both state pensions, a minimum of 43 years' national insurance records for the second state pension will still be necessary, which will particularly disadvantage women aged 45 and over, who are less likely to have accrued a significant amount of S2P, or its predecessor SERPS. We on these Benches also fully support Amendment No. 3 in the group, which would build up S2P. I beg to move.

Baroness Hollis of Heigham: I support Amendment No. 2 and will speak to Amendment No. 3. Both seek to address the problem of people who work beyond state pension age but have incomplete records. Who are those people likely to be? They will obviously be anyone with an incomplete BSP. Currently, only 25 per cent or so of women reach retirement age with a full BSP in their own right, as opposed to drawing on their husband's contributions. Anyone—man or woman—with an incomplete second state pension would also benefit.
	Many women are partnered with men a couple of years older who would expect to continue to work until they are 65. A woman may therefore wish to continue working for a couple more years until they can retire together and therefore may want the opportunity to continue to build her pension. If, under current law, her breaks in record were within the past six years, she could buy added years under voluntary class 3 contributions. If they were, say, 10, 15 or 20 years ago, she could not. In any case, she would not be allowed to buy S2P and as, once even the 30-year rule for BSP is in place, she would still need a minimum of 43 years to get S2P full accrual, she may decide that a payment, for example, of 11 per cent on her earnings above the primary earnings threshold is a prudent investment, not just for her BSP but to get the additional £1.50 a year per year accrual value of S2P.
	We say that we want to encourage women to work longer, and the pension age is being raised to 65. We say that we want to encourage women to build pensions of their own and to enjoy S2P as well as BSP, yet we do not allow them to do it. Why on Earth not? I may be quite wrong on this, but I suspect that my noble friend may suggest two arguments. First, he may suggest that by deferring her BSP the added increments a woman gains will outweigh her losses on her incomplete record, but that is to compare oranges with apples. Why should the one be offset against the other? Why should she not both build a full pension and enjoy the increments if she defers?
	My noble friend may also suggest—certainly, it was an argument in the other place—that this provision would make a woman a less attractive employment option for employers, so it is kinder not to allow her this choice. Of course, it would be permissive and it is a judgment that she, rather than the state, could and should make for herself. In any case, why should employers get a woman's labour on the cheap? Why should they save on their national insurance bill, which they would have to pay for anyone else, at the cost of a woman building a more adequate retirement income? Once pension age has been equalised, employers would have no such choice for those years between 60 and 65. They would have to pay the rate, including national insurance, for the job.
	I point out to my noble friend that the current system is, again, to some degree, unfair to women. A man may retire at 60, play golf and be given freebies—over and beyond any golf cups or caps—of auto credits. We, the state, give a man free contributions towards BSP between the ages of 60 to 65 on his state pension, while he plays golf. However, a woman admittedly can draw her pension from 60 years old, but she is not allowed to pay for contributions of her own even though her financial need may be far greater than a man's. If we support the principle of extended working lives; if we support the principle of no discrimination against older women; if we support the principle of encouraging people, especially the low paid, to build their own pensions; and if we support the principle of encouraging people to avoid needing to turn to means-tested benefits in later age, I hope the Government and the Committee will support an amendment like this.

Baroness Turner of Camden: I support these amendments and wish to draw attention to the briefing that I have received from the Equal Opportunities Commission. It points out that greater support for the over-45s is needed because many are still at risk of not getting even a full BSP in their own right. It points out that women's entitlement to BSP would be increased dramatically by the Bill's proposal to reduce the number of qualifying years from 39 to 30. Nevertheless, there will still remain women in the older age groups who will miss out on getting a full BSP. The EOC advocates, therefore, greater flexibility, as envisaged in this amendment, to enable women to buy into a full BSP by allowing them to make extra contributions if they are able to do so once they have reached what, perhaps, would be normal retirement age. By paying the extra money, they will eventually qualify for a larger pension. This is worthy of support and I hope that the Government will feel likewise.

Lord Skelmersdale: I have some sympathy with the amendments in this group, but many of the arguments of the noble Baroness, Lady Hollis, apply to the next amendment, so I was surprised to see that all the amendments had not been grouped together. Be that as it may, I have some sympathy with the proposal. The Government are rightly trying to encourage people to take more control over their pension pots by introducing measures such as a reduction in the number of years that NICs must be paid and the extension of contribution credits to make it considerably easier for people to work towards a full state pension before retirement age. As has been pointed out by the noble Lord and the noble Baronesses, these amendments go further than the Bill currently allows.
	My concerns rest largely on questions of both cost and feasibility. Allowing people over the state pension age to continue to top up their pension pots would be a considerable spending commitment because what comes in and what goes out are of a vastly different magnitude. Members on these Benches cannot support the amendments because there simply has not been enough research or analysis on the costs and benefits of these suggestions. Were there to be, I might well take a different line. It would be irresponsible to put into this Bill a policy which has not been fully thought through. However, I hope that the Government will look seriously at these amendments and devote some time to fully costing them, then weighing those costs against the benefits that would come from encouraging older workers to stay in work, a matter on which I shall dwell shortly. Until then, I cannot support these amendments.

Baroness Hollis of Heigham: Perhaps I may help the noble Lord. I presume that he supports raising the basic state pension retirement age to 65; therefore, if a woman stays in work between 60 and 65 she will be paying NICs at 11 per cent a year together with the employer's contribution above the primary earning threshold. All Amendment No. 3 suggests is that she should be able to do that if she is in work between the ages of 60 and 65, even though she is not drawing her basic state pension. I do not see the cost issue here. That is exactly where the policies of all parties are going; that is, to draw a pension at the age of 65 and, as a result, to pay in NICs for an additional five years to fund both the BSP and the S2P. I accept that there is a phasing issue, but I do not understand the noble Lord's point about costs.

Lord Skelmersdale: The difference is that the first has been costed and the second—so far as I know, but I am sure the Minister is about to tell us—has not.

Lord McKenzie of Luton: This group of amendments concerns the payment of extra national insurance contributions after state pension age as a means of boosting state pension entitlements where necessary. I thank the noble Baroness, Lady Thomas of Winchester, and my noble friend Lady Hollis for raising this important issue. I shall deal first with the amendment of the noble Baroness, Lady Thomas.
	The raison d'être for our reforms to the basic state pension is to maximise the number of people who retire on a full pension. The amendment is therefore entirely compatible with the intention behind Clause 1. However, no doubt the noble Baroness has sensed that there is a "but" in my response, and indeed here it is: it is simply unavoidable that a small minority of people will reach state pension age without the requisite 30 years of contributions or credits for a full basic state pension. We know that in 2010 around 75 per cent of women and more than 95 per cent of men will retire with a full basic state pension, and by 2025 the proportion retiring with a full pension will increase to more than 90 per cent for both men and women. Therefore we must consider very carefully whether any remedy is proportionate to the problem it is seeking to alleviate.
	The Government are of the view that the amendment is not proportionate because of the potential difficulties it would cause to employers, particularly small employers. Currently, employers operate on the simple rule that they do not deduct national insurance contributions from any of their employees who have reached state pension age. Therefore, let us consider the detail of the amendment. It would allow anyone who reaches pension age without the requisite 30 years for full basic state pension entitlement to continue paying contributions provided he or she does not start to draw his or her pension.
	So what would this mean from the employer's perspective? It is, quite simply, a recipe for confusion. It brings into the whole tax and national insurance contributions equation the concept of voluntary deductions. This would be complicated enough if the option were available to all people working past state pension age; worse if it were to be restricted to the small minority—around 10 per cent by 2025—of individuals who would not have otherwise accrued full basic state pension rights; and far worse if the period for which the option was available were to vary from individual to individual.
	This is the reality of what the noble Baroness is proposing. For each employee over pension age, the employer would need to know whether they were eligible to pay contributions; if so, whether they wanted to pay contributions; if so, whether they wanted to do so for all of the tax years for which they were eligible to pay, or for only one of them, or for some of them; and, indeed, whether they wanted to pay throughout a tax year or only sufficient within a tax year to gain enough credit.
	As the amount payable by way of contributions would depend on the individual's earnings, the "to pay or not to pay" decision may not be as straightforward as it might appear at first glance. For a person earning, say, £120 a week, the amount payable by way of contributions for a full tax year would currently be around £115, but for a person earning around £35,000 a year, it would be around £3,250. So around £3 a week for life for £115 would, I am sure, generally be an attractive proposition; putting the price tag up to £3,250 would make it far less so.
	The complexities inherent in the amendment, particularly for employers, make it simply unworkable, in our view. I hope that I have explained the reasons why we do not agree with the intention or the substance behind the amendment.
	The amendment of my noble friend Lady Hollis occupies much the same territory as the amendment of the noble Baroness, Lady Thomas, although there are two essential differences. First, it restricts the right to pay contributions to people who work past state pension age; but, secondly, this right would not be restricted to those who defer their state pension. I have already explained the potential difficulties for employers raised by the first of these differences and I do not intend to labour the point.
	I would like to make some observations on the second difference; namely, that under the terms of the amendment people would be able to pay contributions and draw their state pension simultaneously. The reason people would be paying the contributions would be to increase their state pension. This raises an interesting question about the point at which the increased entitlement would crystallise. There could be, I suggest, three options. The first is at the point the person has paid sufficient contributions to make that tax year a "qualifying year", which would be when they had paid contributions on earnings of around £4,500. However, when this occurs depends on how much the individual earns. The second is at the end of the tax year in respect of which contributions have been paid. The third is only at the point the person stops paying national insurance contributions.
	The first option would entail the employer or the employee keeping a cumulative total of the earnings on which contributions have been paid and notifying the Pension Service at the point a qualifying year had been achieved. The second option seems more practicable. However, there is inevitably a time lag between the end of the tax year and the contributions being posted to the person's national insurance account. The only way of avoiding delays in getting the enhanced pension into payment would be for the employer to send details of the earnings directly to the Pension Service. This would be in addition to the normal end-of-year return to HMRC. The third option would avoid annual recalculations of the individual's pension entitlement, but does not seem particularly equitable.
	I am not saying that it is impossible to sort out these practical difficulties, but they are potential problems. I come back to the point I made in response to the amendment of the noble Baroness, Lady Thomas, about whether the solution is proportionate to the problems. My contention is that in the case of the amendment it simply is not.
	Perhaps I may pick up on a couple of points. My noble friend Lady Hollis referred to auto credits—the freebie for the golf course. These, of course, will be phased out for men from 2010 in line with the rise in the women's pension age. It is a transitional issue and will disappear. As regards whether employers are getting people on the cheap, employers continue to pay national insurance contributions where an employee is over pension age. The exemption applies only to the employee's share of national insurance contributions.
	There are one or two other points we ought perhaps to reflect upon if we are going to complete the intellectual analysis. It is suggested that the contributions should generate entitlement to both the basic pension and the state second pension. Would it therefore be equitable to restrict the option to pay national insurance contributions to those who do not qualify for a full basic pension? I suspect the answer is no, given those people who, prior to the introduction of S2P in 2002, were out of the labour market because of caring responsibilities or were low earners who will have accrued little or nothing under SERPS. If that were the case, however, should the option be available to everyone working past pension age, or only to those whose SERPS and/or S2P accruals are below de minimis? If so, how would those be aligned?
	If people in work were to have the option to pay contributions past pension age, would it be equitable to exclude those who do not work but carry on their caring responsibilities after pension age from accruing further pension entitlement? We would be changing a fundamental part of the Bill. Again, the answer is no, on the basis that the individual concerned could reasonably argue that, were it not for their role as a carer, they would continue in work. That raises a supplementary question, though: up to what age is that a reasonable premise? Would it be 70, 75 or 80? I do not wish to labour the point, but we need to be mindful that, although on the face of it this may seem a pretty straightforward and reasonable proposition, it would in reality require significant re-engineering of quite a few parts of the state pension machinery. For those reasons, the Government do not support it.

Baroness Thomas of Winchester: I thank the Minister for that reply, and others who have spoken in this short debate. It should be pointed out that the amendment is supported by the Equal Opportunities Commission, Help the Aged, Age Concern and many other groups. The suggestion from the noble Lord, Lord Skelmersdale, that research should be done on this issue is a good one. Does the Minister agree that some research by his department would be a good idea, as this measure would stop so many women being condemned to a life of means-testing in retirement?

Lord McKenzie of Luton: Of course the department will keep all these matters under review, but the key purpose of the Bill is to prevent what the noble Baroness has just asserted the position to be. It is particularly to address equity for women and to ensure that they have fewer years through which they can acquire a full basic state pension and all the extra credits that come from being in receipt of child benefit or other caring responsibilities, which we are going to discuss shortly.

Baroness Hollis of Heigham: On Amendment No. 3, my noble friend made a fair point that I need to reflect on about carers and the read-across to those who are not in work. There remains a basic problem, however. He and I have friends in common, not far from this Chamber, who have incomplete records, are working past 60 and would like to pay their way and build up a complete record, but are not allowed to do so. That is the simple issue, and it seems unreasonable if we are trying to encourage people to have extended working lives.
	I am afraid that I do not really understand my noble friend's point about complexity for employers. If someone is working for an employer at 59 and continues at 60 or 61, the employer carries on doing exactly what he is doing and no change will occur.

Lord McKenzie of Luton: That is not necessarily the case; it is only if the individual wishes to continue to contribute. That raises the questions of whether they wish to contribute for every tax year for which they remain in employment and whether they wish to contribute for the complete tax year, which depends on the level of their earnings. There is a series of quite complicated issues and records that employers would have to keep, which they do not have to keep at the moment.

Baroness Hollis of Heigham: I suspect that in that case, if we are assuming a retirement age of 60, a deficiency notice would be sent out by NIRS2—assuming that the computer system was working properly—to a person of 59, telling them what their shortfall was. On that basis, the employee would be able to make an informed decision about whether they wished, needed to or would continue to pay NICs. I can see no practical problems associated with it if one has the wish to do so. Deficiency notices are sent out now; such a notice would be the basis of employees deciding whether to continue to pay NICs. If they felt they should do so, they could; if they felt it was not necessary, they need not. Either way, the employer is unaffected.
	As far as I understand it, there is no administrative roadblock to having such a provision. I accept that there is an issue about read-across to carers who are not in the labour market so do not have an employer matching contributions. But for the person in the labour market, whom the amendment seeks to address, I see no such problem.
	As for the phrase "while entitled" in Amendment No. 3, it was chosen to suggest that there was an entitlement, as opposed to an act of drawing the basic state pension. That is because the age at which women draw the basic state pension will change over time. I did not try to pin that down in the amendment. It is simply a statement of eligibility; while a woman—or a man, come to that—might be eligible for a basic state pension, they could choose not to draw it because they are in work. They would therefore voluntarily pay a full, proper, costed stamp—which, for the rest of us, is assumed to pay our way for S2P—and, as a result, build up a decent enough record which, according to the Government's regulatory impact assessment and the subsequent figures produced by the Minister for Pensions, would float them off means-tested benefits in the future. If we do not do things like this, some people—maybe not very many—will need means-tested benefits further down the line because they were denied a responsibility they were willing to shoulder of building up a pension in their own right.
	Obviously I shall withdraw the amendment at this stage; I shall reflect on the read-across to carers, but I do not really believe that my noble friend has challenged the core assumption that we are talking about somebody in work seeking to continue to build on their pension while not drawing their current pension. That case remains valid, but for the moment, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.
	[Amendment No. 3 not moved.]

Baroness Hollis of Heigham: moved Amendment No. 4:
	Clause 1, page 2, line 32, at end insert—
	"(5) The contributor may make voluntary contributions at any time before drawing a Category A or Category B retirement pension and for any period of their working life up to a total of 9 years."

Baroness Hollis of Heigham: Amendment No. 4 would allow someone to acquire nine additional years under class 3 contributions. We have a contributory system; I do not want to make a Second Reading speech about keeping people out, but, by reducing to 30 the contributory years for BSP, extending carers' credit and lengthening the working life so that those contributions are more easily acquired for those over 65, the Bill will help to extend the reach and coverage of contributions. I know that everyone in this House is delighted about that.
	However, the Bill leaves us with two broad problems, both of which have been touched on. The first is the cliff edge. A woman who retires in February 2010 needs 39 years' contributions. If she retires in May 2010, she needs 30. A month, a week—even a day—will cost the unlucky lady nine/thirty-ninths' worth of her basic state pension for the rest of her life. It is even possible, to use a slightly exaggerated example, to have twins born either side of that hour by 10 minutes; one would get the basic state pension after 30 years, while it would take 39 years for the other to do so.
	I accept the arguments my noble friend made earlier about transitional arrangements being awkward and complex. That is a valid administrative point. I also accept the point he made to the noble Lord, Lord Skelmersdale, that phasing in the changes means delay. Therefore, the Government's willingness to go for 30 years at 2010 seems decent and humane. I also understand why the Government felt unable to make such changes retrospective—the complexity of record-keeping is considerable. But such an abrupt cliff edge will none the less be perceived as deeply unfair, even more than the reduced married women's stamp which has for many years been regarded as unfair to women. That problem is there, and the ability to purchase nine years would allow someone, if they chose, to avoid that cliff edge. They could make good the shortfall between 30 and 39 by purchasing another nine years. The amendment would address the cliff-edge problem responsibly, but I accept the Minister's arguments about the more technical difficulties of approaching it in another way.
	Admirable though the Bill is in its inclusiveness, excluded groups will remain, even under the more generous provision. As the Government admit on their most optimistic figures, between 5 and 10 per cent of people will be without a full BSP some 20 years down the line. Five to 10 per cent of 11 million people is really quite a lot.
	Let us think of today's amendments. The previous amendment would have allowed people who have passed retirement age but who are still in work to continue to pay national insurance contributions. The amendment to which I shall speak subsequently would bring grandparents who are effectively full-time carers into the system. Amendment No. 31, to which the noble Lord, Lord Oakeshott, and the noble Baroness, Lady Thomas, will speak, would allow people to run multiple jobs below the lower earnings limit. All those amendments are necessary because the contributory principle cannot cover everyone. If it did, it would be a citizen's pension.
	What do we do when we have pockets of excluded groups? My preference is built into Amendment No. 33, which would scrap the outdated and unfair principle of a contributory system and, instead, build an inclusive, residency-based pension. We will argue that in due course. A second option is to go down the track of seeking individually tailored changes for a series of excluded groups—a particular change for those with several jobs below the LEL, a particular change perhaps for grandparents and a particular change for those seeking to work past retirement age. However, I accept that that brings more tweaking, more complexity and more difficulty to the system.
	However, there is a third way, which is what this amendment proposes; that is, a flexible, generic response, allowing people—they will mainly be women—to make good the shortfall by buying up to nine additional years. As I have said, nine years will address the cliff-edge effect fairly; it will make good in full or in part, depending on how many years the person concerned has already accrued, those years during which they made a socially valid contribution to society but which are not tracked for NI purposes. My noble friend the Minister offered two responses to the cliff-edge problem; I am offering a third way.
	Such an approach has five advantages. I have mentioned two of them: it addresses the cliff-edge problem and it would help to include those groups—10,000 people here, 20,000 people there—who will remain excluded even under the far greater generosity of this system. In addition, there are three other advantages in being able to buy nine extra years. The first is that it is eminently workable. The principle of buying added years is already well established. For example, if a student wishes to buy three added years within six years of their missing a year, they can do it now. If one is temporarily working abroad, one can buy missing years. I do not think that I am divulging any secrets when I say that both my noble friend and I have had family circumstances in which we have considered this path. In other words, the path of buying additional years within six years is already available for those who know about it—the well-educated, those who think that they can afford it and the relatively well-heeled.
	In 2004, which is the latest year for which statistics seem to be available, some 250,000 people bought additional years, of whom 144,000 were women and 107,000 were men, mostly in their fifties, paying some £161 million to the Exchequer for the rights. The practice of departing from the within-six-years rule, which is what the amendment seeks by allowing one to buy nine years for any missing years and not merely those six years, has already been established by government. Due to the failure of the NIRS computer to send out deficiency notices telling people of their shortfalls between 1997 and 2001, the Government have allowed people to make good that deficiency right up to 2009-10, which is another 12 years. When it suits government, we do not have to be constrained by within-six-years; we can have 12 years, because the computer has fumbled. That was a decent, sensible and proper response, and it shows that principle is eminently workable. We already allow people to purchase extra years and nudge them with deficiency notices. If appropriate, we extend those extra six years to 12.
	This amendment would add the flexibility that those extra nine years could be purchased at any time and not within the usual six-to-twelve year framework. Many women with jigsaw lives, entering or leaving full-time, part-time or temporary work, caring for children, partners or elderly family members, are unable to predict from one year to the next what the picture on the jigsaw box will eventually look like and whether any pieces will be missing. They may have missing years scattered across a full lifetime. At the moment, only if those missing years were within the last six years can they make that good. Some will know, but many will not know, whether they have the full complement of the NI years—30—until the month when they come to retire, and whether they have a full record and what, if any, years as a result they may want to buy.
	The amendment would give us additional flexibility but it would also mean that if people—mainly women—know that they can make good such a deficiency and buy a full basic state pension, it takes some of the risk out of saving. A second small pension becomes worth having because, with a full BSP, they will not face a pound-for-pound, 100 per cent deduction with regard to the pension credit guarantee, for example. It will help to establish a secure platform for their savings because there will be a predictable floor in the BSP, therefore encouraging more women to save and, I hope, abating some of their poverty in older age.
	What are the costs? We are not talking about a freebie here but a gentle extension of current rules on buying additional years. To buy a class 3 voluntary contribution, which buys only BSP—it does not buy S2P or IP or anything like that—costs on average about £350 or £3,000 to buy nine years' worth. If purchased at 60 with average life expectancy, it is obviously extremely good value. If, as is quite possible, the woman has insufficient savings—and one might then look to Saga or Help the Aged in this regard—a commercial loan could be arranged. At 7 per cent paid over five years, it would cost her £14 per week to pay off the loan, to receive a pension even then worth some £20 a week and, five years on, she would receive the full pension of an additional £20 a week, which those extra nine years would have bought. Even if she had to go down the route of taking out a commercial loan, it would still be worth it each and every year—particularly after five years of the loan being repaid. After 2010 a purchase of up to nine years on the 30 would produce even more attractive returns.
	How many people might we help? Of women reaching state retirement age in 2004, only 10 per cent had 39 or more years of national insurance. A further 25 per cent had a shortfall of up to nine years—so this amendment would fully cover them—and a further 20 per cent had 25 to 30 years' worth of contributions. Again, that is a valuable if not complete addition to a full BSP. Below that, if they were married, it would probably not sufficiently improve their position over the dependent wife's pension.
	On the cost to the Treasury, the figures are imprecise. I got some figures this morning from the department. There will possibly be a modest profit in the early years to the department when contributions are being collected and a modest cost in later years when payments are being made, dependent on life expectancy. Given that already we sell 250,000 people years now, mostly to the better educated or the better off, I very much hope that poorer women with untidier lives and at greater risk should have a similar protection. If money is the argument against making the amendment, that could be rectified almost certainly by a modest increase in the cost of class 3 contributions, so it is more financially viable—and I shall try to do the sums. The principle is that if the Government and the House if necessary supported an amendment such as this, it would overcome the problem of the cliff edge and the problem that we identify today in a series of ad hoc amendments about excluded groups. If we are to build on a precedent that we already have and extend it to those most in need, poorer women with inadequate records need a sure base if they continue to save.
	I hope that my noble friend will feel sympathetic to the amendment, which fits the spirit of the Government's White Paper and seeks to ensure that even more people, especially women, come within its reach. I beg to move.

Baroness Thomas of Winchester: We strongly support this amendment, which, as the noble Baroness, Lady Hollis, said, allows greater flexibility over voluntary backdated NICs to allow workers to fill in gaps in their NI record for any period of their working life up to a total of nine years instead of the much more limited current arrangement whereby some contribution arrears can be paid within six years. This will be a simple but very important reform which could be brought in before the 2010 reforms to allow women not gaining from the reduction to 30 qualifying years to increase their entitlement to both pensions.
	We have to face it: those at the beginning or even in the middle of their working lives simply do not look forward clearly to their retirement years. When and if they do review their pension entitlement, they may find that they have a gap of several years but are too late to buy added years within the current rules. This is a much more modest amendment than the previous one. For that very reason, I hope that the Government will be able to accept it.

Baroness Howe of Idlicote: I support the amendment. I have listened with considerable interest to all the reasons why some of the previous amendments might not be wholly acceptable, but this amendment seems to contain some flexibility and some choice. As we heard, it is strongly supported by the Equal Opportunities Commission and other organisations. The fact that it could be brought in before 2010 is crucially important. I, too, hope very much that the Government will show some flexibility and accept the amendment.

Baroness Greengross: I add my support to the amendment. As the noble Baroness, Lady Hollis, made clear in introducing it, the amendment would rectify the situation of many women, many of whom—as people like me, with my experience, know very well—would be very happy to pay for those extra years. They resent the fact that they were not given advice which would have made it possible to do this at an earlier stage so that they could have the full entitlement. Many of the organisations which have been briefing us support a provision enabling these women to buy those added years in a fairly simple and straightforward way. With such support for the amendment, the Committee should also support it. I wholly recommend it, and I hope that the Minister will consider supporting it.

Lord Skelmersdale: I am afraid that I am not persuaded by the eloquence of the noble Baroness, Lady Hollis. I noted first, as I suspect that she and I will have arguments about costs throughout the proceedings on the Bill, that she described the figures she received from the department this morning as "modest". I do not have the advantage of seeing those figures—though I am sure the Minister will be able to reveal them in due course—but I wonder just how modest is "modest".
	Secondly, the noble Baroness said that even between 5 and 10 per cent of those retiring under the 30-year rule would not have a full contribution record. Some of that 5 to 10 per cent—in other words, about 1 million people—would have the opportunity of using the current system of paying the past six years of NICs. Therefore, you cannot count the entire 1 million or so people to whom the noble Baroness referred. I hope the Minister will be able to cover that in his response.

Baroness Hollis of Heigham: As I say, although I tabled the Question several weeks ago, I picked up the Answer only today, so I have not had time to digest and fully work through the department's figures. However, they suggest that, depending on the assumptions, there would be a diminishing profit to the Treasury for about three years and an increasing cost thereafter. The figures were for only 2007 to 2009 and covered six years rather than nine. They could not, for example, take account of the problem of those who might not wish to buy those years, calculate what implications and interaction there would be for those who are married or calculate the implication of the de minimis rule. That is why the figures cannot, by definition, be robust, and I do not blame the department for that at all. I did not give precise figures because there are too many conditionalities attached to them to be able to calculate them. However, I can give figures for the individual. I emphasise that until now the Treasury has found it absolutely fine to have this provision for about 250,000 people a year who know how to make good their defaults in the system. As we do not know how many women who are not doing so will take advantage of that—the department, perfectly legitimately, cannot tell us—we cannot give precise costs. All we can suggest is that there will be a modest profit to start with and a modest loss thereafter. However, it is certainly affordable for the individual woman—or man come to that—and, as I say, already exists for the rest of us.

Lord Fowler: I have listened to the debate and—I had better say this cautiously—found myself very much persuaded by what the noble Baroness, Lady Hollis, said. There is a slight, very unusual, division between myself and my noble friend, but certainly not on a grammar school scale at this stage.
	Buying back is an extremely good idea which should be encouraged. I am not sure that it adds to the noble Baroness's advocacy of the citizen's pension because I do not think that it fits in with that. However, if we continue with the contributory principle, it would certainly fit in. We do not have an insurance principle; we have a contributory principle. As I understand the Government's policy, we shall continue with the contributory principle. Therefore, one wants to make that contributory principle and its practice as flexible as one conceivably can. It is common sense to follow what the noble Baroness, Lady Hollis, suggested.
	I should point out that buying back takes place elsewhere in the public sector in the occupational area. For example, Members of Parliament are allowed to buy back although none of us former Members, myself included, can remember how many years we can go back. However, I think you will find that it is a little more than the six years that the Government specify.
	I have not yet heard a good reason why this amendment should be rejected but I have heard very good reasons why we should accept it. It would certainly benefit women to a very large extent. It may not be correctly drafted but I hope that the Government will at least accept the principle of it.

Baroness Dean of Thornton-le-Fylde: My name is added to the amendment. I can think of no reason why I should not have added my name to it because it does not introduce any new principle. It would enable what I think we are all trying to move towards; namely, independence for women in retirement. If they have the funds later in life to buy back these years under the principle which has been established elsewhere and, indeed, in the state system, I cannot see any reason why that cannot be considered. I find it difficult to understand the argument that it is not affordable. We do not even have the full figures in front of us. I do not see any objection to the measure in principle and I am unconvinced that there is any financial objection. I am certainly convinced that it would help women to be independent in retirement, which I hope this Bill is striving for; in fact, I am sure that it is.

Lord McKenzie of Luton: I thank my noble friend for raising this important issue and for the debate that has taken place. She touches again on the cliff edge, which we debated earlier. We acknowledged that if these matters could be phased in gently and still enhance the position of many women, that would be worth doing. The cliff edge arises because we have determined to introduce the measure in 2010 because that is the way to maximise the benefit, particularly for women.
	The group of amendments that we just debated concerned the payment of national insurance contributions after pension age. This amendment seeks to give greater flexibility over the payment of voluntary contributions to fill gaps in the working life when the contributor was not working for whatever reason. It would, in effect, remove the current time limit for paying voluntary contributions and allow people to wait until the very last minute—just before claiming their state pension—to make up missing years. That has the support of the EOC, and it would especially help women to achieve a full pension. However, the amendment would only benefit people reaching state pension age after 5 April 2010. It would not therefore help those who do not benefit from the provisions in this Bill. I do not believe that was intended, but that is the effect of the amendment.
	Time limits for payment of voluntary contributions are dealt with by regulations made under Section 13 of the Social Security Contributions and Benefits Act 1992, and noble Lords may be aware that the responsibility rests with HM Treasury. By way of background, the existing rules for paying voluntary contributions allow contributors up to six years to pay the voluntary contributions due in a particular tax year, although in certain circumstances the time limit can be extended. The time limits were extended from two years to six years for tax years from 1982-83 onwards.
	As my noble friend identified, there are extended time limits for the 1996-97 to 2001-02 years. Contributors have until 5 April 2009, or 5 April 2010 if they reached pension age before 24 October 2004, to pay voluntary contributions for those years. That extension was introduced because from the 1996-97 year the then Contributions Agency suspended its annual deficiency notices exercise. That exercise is used to notify contributors that a tax year is not a qualifying year for benefit purposes and to give them the opportunity to pay voluntary contributions. When it was reinstated, the time limits were extended to allow contributors at least the amount of time to pay that they would have had if the notices had been issued at the correct time.
	The current rules are already widely drawn and allow those over state pension age to pay voluntary contributions to fill gaps in their contribution record. For example, a contributor reaching state pension age today, who did not pay voluntary contributions in the 2006-07 tax year, would have until 5 April 2013 to pay those voluntary contributions, albeit at the voluntary contribution rate applicable in 2012-13. That gives those retiring the same wide degree of flexibility as someone yet to retire.
	We do not believe that it would be appropriate to remove the time limits for paying voluntary contributions. It would be incongruous to allow people unlimited time to pay voluntary contributions when those who are employed or self-employed have no choice about when they pay national insurance contributions. Time limits are an important feature of the "pay as you go" system of NICs, in that current payments of contributions pay for current claims to contributory benefits. The amendment would distort that feature by incentivising delayed payment. We are not aware of any evidence that the time limits are too restrictive for those who generally pay voluntary contributions. Also, we would not wish to create an incentive for people to delay paying voluntary contributions until the last minute, because it would create additional complexity and add to the costs of administering those arrangements.
	The amendment restricts to nine the number of years for which voluntary contributions can be paid over a working life by someone just about to claim their pension. I am not sure whether that was intended. That would be less generous than the current arrangement, which imposes no restriction on the number of years for which an eligible contributor can pay voluntary contributions, subject to the relevant time limits. You can pay class 3 contributions for 30 years so long as you pay them in each case within the six-year time limit. Such a restriction would add complexity to the current arrangement, and it would ill serve the very people whom my noble friend seeks most to help.
	In conclusion, the existing time limits for payment of voluntary contributions are both appropriate and necessary. However, I recognise that some people would still not achieve a full basic state pension, despite the more generous arrangements in the Bill. But to allow them to make up missing years at the point when they are due to retire would require them to make complex financial decisions. For example, it might not be sensible for a married woman with a smaller basic state pension based on her own national insurance contributions to pay voluntary contributions when she reaches state pension age if she would be entitled to a higher pension based on her husband's national insurance record. I understand the concerns that have been raised and assure noble Lords that we will keep under review the current arrangements for paying voluntary contributions. I remind noble Lords that changes to the time limit can be made by secondary legislation if they are deemed to be necessary.
	On the issue of cost—although the amendment would apply only to people retiring post-2010—we have produced estimates that assume that people who are projected to reach state pension age in 2007, 2008 and 2009 without a full basic state pension, and assume that they buy as many extra qualifying years as are needed to provide a full basic state pension, up to a maximum of six years, when they reach state pension age. Those costs, which my noble friend described as "modest", would provide net benefits in 2007, 2008 and 2009 of £1 billion, £0.5 billion and £0.2 billion respectively. Thereafter, there would be costs in the order of £0.8 billion, £0.9 billion through to £0.8 billion in 2030. Those costs would then begin to tail off.

Baroness Hollis of Heigham: Given the figures that have emerged today regarding the net additional cost of the gap between the price and the value of those increments for additional people who might come in—there are many less-than-robust assumptions about who might come in, and that is why the figures are difficult—what is the current deficit? At the moment, people are paying £161 million for 250,000 "people years" of class 3 contributions. What would the figures be if one applied the same arithmetic to the current arrangements?

Lord McKenzie of Luton: I do not have those figures to hand, but will certainly provide them to my noble friend. I was about to say that many caveats surround the figures that I have outlined, as she recognised. We should be cautious about calling such costs "modest", quite apart from the principles that would be involved in going down the path that we have suggested. For reasons of cost and practicality, on reflection, my noble friend would recognise that the precise drafting of her amendment does not achieve what she seeks. I encourage her to withdraw it.

Baroness Hollis of Heigham: I thank my noble friend for the detail of his reply, which I will work on. He made two points—one on the complexity and impropriety of delay and of being able to pay at any stage, and another point regarding costs. We will return to the issue of costs, but when I asked for the figures, I was told that they were not available—although some of them have become available on the day of the Committee. It is difficult to be certain about what is being compared with what. I hope that my noble friend will do the work for me on this, because I am not sure that I can. I have said that I would be perfectly willing to discover what the cost of a class 3 contribution would have to be to make it cost effective, both for existing holders, who, according to my noble friend, are getting a freebie ride—the better educated, students and so on—and for women who might have even greater need than at present. So there is a bundle of issues associated with cost that we must scratch away at.
	My noble friend's argument regarding time limits hinged on the question of delay. For the life of me, I do not understand the problem. My noble friend said that the amendment would incentivise delayed payments. Why does delay matter? At the moment, if you are in work, you pay your contributions as you go. If you know about it, you pay at the time. If you wish, you can pay for your whole life, as long as you do that within every six-year period, as my noble friend said. I do not understand why delay is even faintly relevant. Apparently you can buy 30 years of class 3 contributions at enormous cost to the Exchequer if you do it within six years, but we cannot, within nine years, apply the contributory principle to women who might come within the range of means testing at the end of their working lives, as the noble Lord, Lord Fowler, argued. I am sorry, but I am baffled by my noble friend's argument on that. Perhaps he can help me further.

Lord McKenzie of Luton: I will try to help my noble friend. The issue of timing is important. People who are employed pay national insurance as they go along. The opportunity to pay class 3 contributions for an extended period until six years after the tax year in question gives some leeway, but one has to ask whether it is fair when you compare someone who pays their pension contribution on day one in each pay period with someone who says, "I will store up my class 3 voluntary contributions and take a call on it at the end of my working life when I am about to retire". There is a time cost to money and it seems to me that if we encouraged people to delay making their class 3 contributions until the last minute, that would have an impact on the National Insurance Fund. The scheme has a pay-as-you-go basis, as my noble friend is aware, and there are cost implications to that.

Lord Fowler: I am not sure whose speech I am interrupting but would the Minister have the same objection if, instead of "six years", one simply inserted "nine years", without the other parts of the noble Baroness's proposition?

Lord McKenzie of Luton: If the noble Lord is asking whether the Government would support the idea of being able to pay nine years after a relevant year, then obviously that is not a proposition that we have considered. We have no costings on that, robust or otherwise, but, again, it would move us away from encouraging people to pay on a reasonably expeditious basis. It seems to me that six years allows a reasonable amount of leeway but that nine years moves further away from that principle.

Baroness Hollis of Heigham: I shall withdraw the amendment but I still do not understand why payments have to be expeditious. Apparently they can be made for 30 years up to six years after the event. This cannot be an issue of cost. It is said that it is unfair to allow people to make extra contributions because of the additional cost to the rest of us, but we already allow 250,000 people years to be bought, often by students and so on who go on to be higher-rate taxpayers. However, apparently we are not willing to do this for women.
	I cannot bottom out my noble friend's argument. Why is it bad to make the payments at the end of your working life but good if you do it in the middle of your working life? Some women may know only at the end of their working life whether they need those extra years. If you cannot predict what you are going to need until you reach retirement age, you will be penalised, whereas a student, say, or someone who works all their life in a profession can predict what they are going to get and they can make the contributions. I am still completely baffled by why delayed payments are not permitted. Provided that the cost is right, what is fair for the gander should be fair for the goose.

Lord McKenzie of Luton: Under the current system, if someone has been in employment for a number of years or, if working abroad, has been out of the labour market for a number of years and decides to make voluntary contributions, he must do so within six years of the tax year in question. Under my noble friend's proposition, he would not have to make the payment at that time but would simply store it up and take a view of the situation in 20, 30 or 40 years' time. My point is that there have to be timely payments into the National Insurance Fund.

Lord Oakeshott of Seagrove Bay: As we are in Committee, perhaps I may ask a question. I have listened to the debate and, in particular, to the noble Baroness, Lady Hollis. Does the Minister agree that here we are talking about a very male-based contribution model? Inherently, many women's lives are less predictable, so the point that the noble Baroness is making is very valid.

Lord McKenzie of Luton: That may be right. The current system, which we are about to change, is very male-oriented. My noble friend has made that point with great conviction during Second Reading and on previous occasions, but we are changing the system.
	Under the Bill—with all the credits that are available for people with caring responsibilities and with the truncated period of 30 years to get to full basic state pension—there is considerably more flexibility in a working life. It does not seem unreasonable to hold to the view that you can still make up contributions but that you must do so within six years. There may well be a case for looking at whether the deficiency notice provides sufficient information for people to make the right sort of judgments. However, if we go down the path of saying that people who want to make a class 3 contribution to improve their pension outcome need not do so until the end of their working life when they are about to get their state pension or, indeed, until possibly six years after that, that will change the landscape.

Lord Skelmersdale: It seems to me that we are departing from a principle with which I thought we all agreed: namely, the contributory principle. At the moment, the only dent in that contributory principle is the six years relating to voluntary contributions. Extending that further will increase the debt until eventually it becomes a gaping hole, will it not?

Baroness Hollis of Heigham: The problem is that the contributory principle is based on a Beveridge-type principle, which, given the society at the time, was the male model of working life. However, it has produced many excluded groups. Governments of all complexions, very decently, have tried to bring more and more groups within the contributory system—since 1978 we have had HRP, disability benefits, various credits and the like and now this Bill. We can no longer simply tie this in to a pay-as-you-go system in a mechanical way—you pay it at a point in time. The six-year rule exists to help another group: for example, students and those who work abroad temporarily. There are still groups—these amendments seek to address them—who will remain outside any contributory system, yet most of us would regard their lives as valuable and we would want to see them brought within the system so that they can enjoy as full and as complete a basic state pension as possible.
	This amendment would allow head space for that. Rather than having a series of one-off solutions—multiple jobs, grandparents, whatever—producing half a dozen different possible solutions, we can seek to do it this way. If we do not, I can promise my noble friend that, in a couple of years, someone else will return with another Bill trying to make good further deficiencies in a contributory principle that has been stretched and stretched. This is a contributory system that you pay at the end of your life to make good shortfalls.
	I am still completely baffled why a delayed payment is inferior and bad whereas a payment within the six years is good. I find that incomprehensible. I am very grateful for the support from all Benches for the amendment. As my noble friend will expect, I shall return to the matter on Report in the hope that he can give me better news and more encouragement than he has been able to give today. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.
	Clause 1 agreed to.
	[Amendment No. 5 not moved.]
	Clause 2 agreed to.
	[Amendment No. 6 not moved.]
	Clause 3 [Contributions credits for relevant parents and carers]:

Lord Skelmersdale: moved Amendment No. 7:
	Clause 3, page 3, leave out lines 26 to 31

Lord Skelmersdale: We move on to carers and, in this amendment, to a particular group of carers who concern me a great deal. Members of the Committee may have heard a harrowing report on the "Today" programme a few weeks ago concerning children with disabled parents who cope with school and caring activities. I came to know about their plight some years ago when the Stroke Association started giving annual life-after-stroke awards. One of those is a carer's award which is frequently won by children.
	My amendment is a probing amendment on an aspect of the carer contribution reforms that I do not believe was debated as the Bill proceeded through another place. Specifically, I wonder how current arrangements stand, should stand and will stand in relation to children who are carers. What happens to them after school-leaving age? No doubt some will get part-time jobs, but others will become full-time carers and be unable to start work because of their caring responsibilities. I do not know—I hope the Minister will tell me—whether I am talking of a constant number, or of a growing band of children. Since I tabled the amendment, it has been suggested to me that the latter is the case, but I simply do not know. Whatever the case, those children do an incredibly difficult job and one that, in the past, society has tended not to notice or to make accommodation for.
	The reforms in the Bill will, of course, make it easier for these children to move into their adult years without being penalised, rather than rewarded, for their exceptional contribution to society. I particularly welcome the change that means that it is no longer necessary for a person to have paid at least a year's worth of contributions before he or she can claim a pension. I repeat that some children today will never have an opportunity to take a full-time job, whether because of the weight of their caring responsibilities or because those responsibilities prevented them getting as good an education as they might have had or for many other reasons. I hope that the Minister will be able to reassure me that these children will be moved on to the system swiftly and simply and will receive contribution credits when they reach school-leaving age.
	Employment is an extremely important subject in the context of the Bill. It is not just about the wage received. Numerous studies show that the employed are healthier and happier. Social networks are increased, self-confidence grows and carers will be much better served by a Government who concentrate on providing sufficient support so that they are able to enjoy a full life outside their caring responsibilities. However, for some people, perhaps many people, that is not the case, so I beg to move.

Baroness Thomas of Winchester: I shall speak to Amendment No. 8. I am fully aware that it is pushing at an open door. After Second Reading, the Minister sent a helpful letter setting out how the new policy of carer's credits for those caring for at least 20 hours a week would work in the light of the agreement now reached that if carers looked after those not in receipt of certain benefits, they could still qualify if certified as carrying out this important work by a health or social care professional. Not only will this new right build up entitlement to the basic state pension, it will also increase the number of people accruing entitlement to the second state pension. In the letter, the Minister reiterates the announcement made by James Purnell, the Minister of State for Pensions Reforms, and goes on to say:
	"You may wish to note that he"—
	Mr Purnell—
	"also stated that we would explore how health and social care professionals will be involved in the certification process for the carer's credit through the review of the 1999 national carer's strategy".
	I gather that that is due to be completed by the end of this year, after which the relevant regulations are expected to be laid.
	This all sounds fine, but we need some cast-iron guarantees. The word "explore" and the phrase,
	"due to be completed by the end of the year",
	could lead to drift, particularly as there is a little time in hand. Can the Minister assure the Committee that there will be no foot-dragging in the area of deciding exactly who can qualify as a carer and who can certify a carer? I am certainly not ungrateful for the way that the Government have moved on this matter, but we need a few more certainties on the record.

Baroness Hollis of Heigham: Are the other amendments in this group—Amendments Nos. 12 and 13—going to be moved?

Lord Skelmersdale: There are no other amendments in this group. We are discussing Amendments Nos. 7 and 8.

Baroness Hollis of Heigham: My grouping list includes Amendments Nos. 12 and 13 in this group. If they have been ungrouped, I stand to be corrected.
	The Committee showed me great indulgence on the previous amendment, so I shall very briefly say that I support this amendment. However, the difficulty is that this provision remains very fluid. None of us doubts the intention and good will of the Government in this respect, but it depends on the carer's strategy coming through and being embodied in regulation. Indeed, it depends on Ministers in the department—who may or may not be the same people after any reshuffle—being persuaded of the same position. We have seen the Government desirably change their views on this during Committee, and I would like to see that embedded in the Bill. However, I accept that this may, more appropriately, be a matter for regulation, so can my noble friend show us the draft regulations that are due to be published within, say, six months of the Bill, so that we can at least have the assurance that the intention is covered if not in the Bill, in regulations? If my noble friend feels unable to accept the amendment as currently described, can she at least help us on that?

Baroness Morgan of Drefelin: I am delighted to respond positively to the debate on behalf of the Government. This is not a personal response, so I hope that it will be a long-lasting response.
	Clause 3 has the effect of replacing home responsibilities protection with a new more generous system of contributions credits for carers. Before turning to the amendments, I shall set out how the provisions in the clause achieve that. It is important to take a few moments to do so for the reasons raised by the noble Baronesses.
	The pensions system has recognised the valuable contribution of full-time carers since the mid-1970s. Home responsibilities protection—or HRP, as it is commonly known and has been referred to today—recognises three broad groups of carer: first, those undertaking a parenting role, including parents awarded child benefit for a child under 16; secondly, registered foster carers since 2003; and, finally, those caring for severely disabled people.
	Although at first HRP was a ground-breaking recognition of other ways of contributing to society alongside working, aspects of it make carers less certain about the state provision they will get when they reach pension age. In order for HRP to protect someone's basic state pension, that person must be in one of these categories for a complete tax year, as has already been mentioned. For example, if a woman had a child in May and was subsequently awarded child benefit, from that point she would not necessarily qualify for HRP that year. HRP provisions would take effect from the following tax year, with each complete year of HRP reducing the number of qualifying years needed for a full basic state pension.
	HRP has worked well, but it is difficult for people to understand. Clause 3 will be much simpler. It introduces new contributions credits for relevant carers. And, as with all national insurance credits, they will be available to people from age 16—and I hope that offers some reassurance—until they reach state pension age. I shall speak more about 16 year-olds in a minute.
	Moving to a system of credits will address the more negative aspects of HRP. People can combine part years spent caring with time spent working, or some other credited activity, in order to accrue sufficient contribution credits for a qualifying year. Each qualifying year is recorded against the 30 needed for a full basic state pension, making the system simpler to understand.
	I turn to Amendment No. 7. There are three groups of carers—not so very different from those recognised under HRP—who will benefit from the contributions credits under Clause 3. These are set out in subsection (3) of the clause, the subsection that the noble Lord, Lord Skelmersdale, seeks to remove—although I appreciate his amendment is probing.
	The first and second groups are persons awarded child benefit for a child under the age of 12 and approved foster parents. The third category of carer is those "engaged in caring", and the definition of this group will be set out in regulations. I shall explain more about this group and the approach we are taking. I wish to offer as much reassurance to the Committee as possible. The Government are very proud of this area and to be moving forward providing additional support for carers.
	Currently, HRP can be awarded to someone looking after a severely disabled person for at least 35 hours a week. However, very few people claim it. Only about 1 per cent of HRP is awarded for care of severely disabled people, as most people who provide this level of care receive credits through the carer's allowance. However, we recognise that those providing at least 20 hours of care a week can be disadvantaged in the labour market. For this reason, the proposed regulations will ensure that anyone in this group will be able to claim the new carer's credit.
	When we introduced the Bill, we stipulated in the accompanying delegated powers memorandum that the person or persons being cared for should be entitled to the attendance allowance, the middle or higher-rate care-component disability living allowance, or the constant care attendance allowance. We did this originally so that we could take a light-touch approach to determining entitlement to the credit, but we have listened to representations from a number of organisations and to the debate in another place. That is why my noble friend reiterated at Second Reading the Statement on the carer's credit made by my honourable friend James Purnell, the Minister for Pensions Reform.
	To be absolutely clear, there will be two routes by which people will be eligible for the carer's credit, and they will both be covered in the regulations. First, as I have stated, the carer's credit will be available to those caring for at least 20 hours a week for one or more severely disabled people with certain qualifying benefits. Secondly—this is the important point—a person will be eligible for the carer's credit if they are certified by a health or social care professional as caring for at least 20 hours a week, irrespective of whether they are caring for someone with or without benefit entitlement. Through this second route, we are providing even more flexibility to deal with the situation whereby the person being cared for is not entitled to one of the specified benefits or chooses not to claim it. In this case, the carer will get the carer's credit if they are certified by the health or social care professional as caring for at least 20 hours a week. We plan to explore this process fully through the review of the national carer's strategy, in which carers' organisations are actively engaged. I stress that this is a consultation on how the process will work and not on whether the regulations will include this alternative route. This has been stated in the Commons and restated here on Second Reading, and I make these points for the record now.
	We do not believe that it is necessary to put a separate definition in the Bill to recognise those certified by health or social care professionals as caring for at least 20 hours a week, which Amendment No. 8, tabled by the noble Lord, Lord Oakeshott, seeks to do. The same effect will be achieved through the regulation-making power that is already set out. Importantly, the regulation-making power will give this and future Governments the flexibility to reflect the changing nature of care over time and the needs of an ageing population.
	I hope that I have been able to reassure noble Lords. The noble Lord, Lord Skelmersdale, made a point about child carers. I, too, recognise the enormously important role that young carers play. I should state for the record that children under the age of 16 who may receive the carer's allowance will receive credits in the same way. Young adults of 16 and 17 also receive starter credits. I, too, believe very strongly that young adults of 16 and 17 should be advised of their entitlement and moved swiftly and confidently on to these credits. The Children Act has provisions for local authorities to pay particular attention to the needs of child carers and to their needs when they turn 16 and become young adults. That should be in place, particularly for children who are being treated as children in need. I hope that I have offered the reassurance that noble Lords seek, and that the noble Lord will withdraw his amendment.

Lord Skelmersdale: I, for one, never intended to press my amendment, but I think that there will be universal approval for the Minister's speech. On my amendment, I am particularly glad to hear that carer credit will be available to young adults of immediately post school-leaving age. However, I am not sure that the local authority is the right body to tell them. If a young adult has been in receipt of care allowance previously, the department would be in a good position. If they have not been in receipt of such an allowance, it is rather difficult to think who would be the best person to advise them or to whom they should apply for advice. Perhaps the GP or the healthcare professional might be the appropriate person, but we can all think on that because there will be time before the regulations are laid before us.
	On whether the noble Baroness's amendment should be in regulations or not, yes it should. Since everything else in this clause is being done by regulations, it is perfectly logical that this should be too. With those remarks of praise to the Minister, who I note is unisex because I called her the noble Lord a few minutes ago, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.
	[Amendment No. 8 not moved.]

Baroness Hollis of Heigham: moved Amendment No. 9:
	Clause 3, page 4, line 17, at end insert—
	"23B Contributions credits for relevant grandparents and other relatives
	(1) This section applies to the following benefits—
	(a) a Category A retirement pension in a case where the contributor concerned attains pensionable age on or after 6th April 2010,(b) a Category B retirement pension payable by virtue of section 48A in a case where the contributor concerned attains pensionable age on or after that date,(c) a Category B retirement pension payable by virtue of section 48B in a case where the contributor dies on or after that date without having obtained pensionable age before that date,(d) a widowed parent's allowance payable in a case where the contributor concerned dies on or after that date,(e) a bereavement allowance payable in a case where the contributor concerned dies on or after that date.
	(2) The contributor concerned in the case of a benefit to which this section applies shall be credited with a Class 3 contribution for each week falling after 6th April 2010 in respect of which the contributor was a relevant grandparent or a relevant relative.
	(3) A person is a relevant grandparent in respect of a week if the person is engaged in looking after, within the meaning given by regulations, a grandchild or grandchildren under the age of 12 or a disabled grandchild or grandchildren under the age of 18, in that week.
	(4) A person is a relevant other relative in respect of a week if the person is engaged in looking after, within the meaning given by regulations, a child or children under the age of 12 to whom he or she is related or a disabled child or children under the age of 18 to whom he or she is related, in that week.
	(5) In this section "relevant other relative" shall include but shall not be confined to a sibling, half-sibling, aunt, uncle or cousin of the child or children who is or who are being looked after but shall not include a registered childminder.
	(6) Regulations may make provision for a person's entitlement to be credited with Class 3 contributions by virtue of falling within subsection (3) above to be conditional on the person—
	(a) applying to be so credited in accordance with the prescribed requirements, and(b) complying with the prescribed requirements as to the provision of information to the Secretary of State.
	(7) For the purpose of determining entitlement to a benefit to which this section applies, a week that falls partly in one tax year and partly in another is to be treated as falling in the year in which it begins and not in the following year.
	(8) In this section "the contributor concerned" has the meaning given in section 21(5)(a)."

Baroness Hollis of Heigham: This amendment is necessary if Amendment No. 4 concerning added years is not acceptable to my noble friend. Amendment No. 9 proposes that a relative, probably but not essentially a grandparent, who cares for a child under 12 for 20 hours a week or more, to be specified in regulations, would be eligible for credit to his or her BSP. Clearly, this is a probing amendment at this stage. Why? The average age when a woman becomes a grandmother is now 49 or 50. She provides childcare in order that her daughter, who may be a lone parent, can work. Some 2.33 million women in work have children under 12 years old and they pay tax and national insurance.
	Theoretically, those women would be eligible for HRP if they were not already paying for their own full stamp. They work because they have childcare. For one-third of them, their primary child minder is the grandparent. Why? Childcare is a matter of trust. You feel comfortable and less guilty working. Most women I know who work with young children have an edge of guilt and concern. They feel less guilty if their young child is looked after and loved as they would do, and they get that from their own mother. If a child is poorly, a woman would trust their mother to take him or her to the GP in a way that a registered child minder—certainly, a nursery—probably could not or would not do. Because the grandparent is childminding, the daughter can and does work. I have been briefed on this by the West Norfolk Women and Carers' Pensions Network. It can be an issue particularly in a rural community where travel to work is harder, wages are lower, commercial childcare is less available, families are less mobile and there is therefore much more likely to be reliance on grandparent care.
	However, that care comes at a huge price to the grandparent who may, in her fifties, otherwise have been able, finally, to work full time. But if she does, her daughter may not be able to do so. The grandmother loses any potential income from a full-time job and, with it, loses any entitlement to a BSP. Yet, although the daughter gets HRP, in theory, and pays a stamp—a double-qualification—neither can be transferred to the mother. What is worse—which is why this really is a problem—is that, because the childcare is provided by a grandparent, the grandparent cannot be registered as an official childminder and cannot be paid childcare tax credit. That is extremely unfortunate; indeed it is daft. I hope that no one will talk about the commercialisation of family care. We do it all the time when we call it the carer's allowance for older people. The result is that grandmothers still undertake the care, but daughters cannot claim childcare tax credit for their mothers and therefore can seldom afford to pay for that care, unlike the position if their child is cared for by a relative stranger. Instead the daughter may do her best to help with grocery or petrol expenses. Both the mother and the daughter are stuck. Let us be clear: without care by grandmothers, many daughters would not and could not contemplate work. With that care they do work, but courtesy of a degree of loving exploitation gracefully given by a woman in her fifties who loses income and pension.
	The amendment proposes that where 20 hours of care are established and the parent is in work, the notional HRP that has been forgone should effectively be transferred and become a childcare credit for pension purposes for the carer. It then becomes something of a win-win situation: a secure, stable and loving environment for the child; a less guilty and stressful working life for the mother; and even if income is forgone by the grandparent, the pension has not been lost.
	I know how receptive and responsive my noble friend has been to the issues faced by some grandparents, so I hope he will recognise that this is yet one more problem encountered by women in their fifties. It would disappear if Amendment No. 4 were embraced, but in the absence of that, I wonder whether my noble friend can help me on Amendment No. 9. I beg to move.

Lord Oakeshott of Seagrove Bay: I pay tribute to the West Norfolk Women and Carers' Pension Network, part of the Equal Opportunity Commission's pensions network, for raising this important point on behalf of mothers and grandmothers. In her thoughtful speech, the noble Baroness, Lady Hollis, gave us some interesting statistics, and I have one or two more. The 41 per cent of women who work part time earn on average 41 per cent less per hour than men working full time. That gives us some idea of the gap. Further, parents in a weak labour-market position, such as unskilled workers, often find it harder to negotiate family-friendly working arrangements with employers and to find jobs that fit in with their parental responsibilities. Their bargaining power in the labour market is clearly not high. We agree with the West Norfolk Women and Carers' Pension Network that more work needs to be undertaken nationally to discover the full effect of how grandparents miss out on state pension provision.
	Like us, the noble Baroness, Lady Hollis, supports a universal citizen's pension, but to be honest, we are sceptical about whether this amendment is on the right side of the line of how far one should go down the route of introducing lots of individually tailored changes. That is what worries us. If I may put it this way, the more tweaking and complexity introduced to try to patch up this broken system, the more complicated it gets. On balance, and with reluctance, we feel that this is probably a complication too far. We would prefer to go for more universal amendments short of a citizen's pension. However, I pay tribute to the pensions network for raising the issue. It is something we need to keep a close eye on.
	Finally, I was struck by the way the noble Baroness talked about loving exploitation, particularly the edge of guilt in the relationship between mothers and grandmothers and the issue of childcare. Just last Saturday lunchtime, my daughter, who is not even married yet and so far as I know has no immediate plans to have children, casually said to her mother, "Mum, when I have kids, would you look after them for two days a week, please?". I hope that my daughter is going to be a well-paid barrister and thus able to afford childcare, and my wife is a doctor with no plans to give up work. She said, "Certainly not. At least, not unless there is a problem".

Baroness Greengross: I speak as chair of the All-Party Group on Grandparents and Extended Kin. I agree completely with the noble Baroness, Lady Hollis, that it would be better if we did not have to make small adjustments. Anything that can help grandparents to retain their pensions rather than suffer the tremendous disadvantage that so many of them face at the moment when compared to non-family carers would be welcome. It is grossly unfair. In many instances social services will come round with the child and say to the grandparent, "Will you look after this child?". The grandparent will obviously say, "Yes", and therefore exclude herself—it is usually "herself"—from the benefits that would have been available to someone who was not a relative. That is only one example of the awful things that happen to grandparents. At least we could help them through the amendment not to lose out on an entitlement to a pension. I support the amendment with the same reluctance as the noble Baroness—we would prefer something better—but, in the circumstances we face, anything to help grandparents would be welcome.

Baroness Howe of Idlicote: I support the amendment, not with reluctance but because it is crucial to face this issue. A huge number of grandparents are now involved in supporting their daughters and sons—usually it is their daughters—so that they can have a full working and parenting life and not be in the same position the grandparents are in now. There may be a better way of doing this—I accept that—but we are asking the Government to find a better way to deal with this situation and, at the same time, to acknowledge the amazing extra sacrifice being made by this generation. I very much support the intentions of the noble Baroness, Lady Hollis.

Lord Skelmersdale: I do not want to go into my family history in the same way as the noble Lord, Lord Oakeshott, but, on these Benches, we fully support the idea that government benefits should not unintentionally penalise those families who support each other with the upbringing of a child. So, to that extent, I go along with the amendment. Having a grandparent or other close relative to rely on for help with childcare, whether it be on a regular basis or for emergencies only, can be a critical factor for a parent in deciding whether or not to go back to work. That, of course, is the best way of ensuring that a child is not brought up in poverty.
	There is also, unfortunately, a rising number of families in this country where neither parent is capable of bringing up a child for one reason or another. In this situation it is almost certainly the case that it would be better for the child to be looked after by the extended family rather than to be sent into care. But—and there always seems to be a "but" in my responses to the noble Baroness's amendments—I see a small problem in the amendment, to which I am sure the Minister will allude. The amendment appears to make contribution credits payable twice for the same child, once for the parents and once for the grandparent. I have tabled a later amendment that relates to the reallocation of child benefit—which, in a sense, is linked—and it might be a more appropriate way of dealing with the situation. I am sure the Minister will tell me, perhaps before the noble Baroness tells me I am wrong.

Baroness Hollis of Heigham: I take the point that the amendment may be inappropriately and badly drafted but it is intended to apply to those daughters who are in work, paying national insurance and tax, and who have a child under 12. It would qualify them if they were not drawing down HRP because they are already covering themselves through NICs. That is the point about the double provision and why I did not think the amendment contained the error suggested by the noble Lord.

Baroness Dean of Thornton-le-Fylde: I, too, support the amendment. It was interesting to hear the comments of the noble Lord, Lord Oakeshott, but, with all due respect, many grandparents are not in a position to respond in that way. With the increasing fragmentation of the family in the UK, this is a growing problem. The amendment is not an ideal way of dealing with this situation—we would prefer something in the Bill that took out some of the complications—but it is a way of raising the issue. All of us who support the amendment would love dearly for the Minister to come forward with a solution. If we do not raise this issue in this Bill, we will have no other opportunity to do so.
	There are grandparents and parents out there who are acting as carers, but not because they want to. I think most grandparents would love to say no, but they do not have the opportunity. That is certainly the case in our family. I shall be interested to hear the Minister's reply to this discussion and I hope we will see some movement on the issue.

Baroness Turner of Camden: I support the amendment and what has been said succinctly by my noble friend in moving it. It seems that every effort has been made in the amendment to try to ensure that the extended family is covered. Subsection (5), for example, describes what is meant by a "relevant other relative", but it also says, "shall not include a registered childminder". In other words, it is clearly directed at the grandparents and the extended family, which is terribly important in the current situation. It may be important for ethnic minorities, where the extended family is important and there may not be any other form of benefit for the people who look after the child, such as the grandparents.
	This is an important amendment. Even with all the difficulties that we know are involved, we still have to find a way through in order to give the relevant benefit to the relevant people.

Lord McKenzie of Luton: I fear I am going to disappoint my noble friend yet again, but I hope I can convince her that in doing so we have a good basis for supporting grandparents. I am conscious of the heroic efforts of many grandparents in supporting their children and their grandchildren. I have had the opportunity twice in recent months, together with the noble Baroness, Lady Massey, to meet groups of grandparents and understand some of the tragic circumstances that they have encompassed in their lives and the struggles they have. We reasonably address their circumstances under the Bill.
	Broadly speaking, the amendments seek to give national insurance credits to a relevant grandparent or other relative who is engaged in looking after a child to whom they are related. In the debate on the previous group of amendments we discussed how we intend to define "engaged in caring". It would be interesting to hear from my noble friend how we define "engaged in looking after" and how that differs from "engaged in caring". In the debate that has taken place we have to a certain extent conflated those two concepts, and it is important that we separate them. "Looking after" could be more occasional, and something less than "caring".
	We already have a tried and tested way of identifying those who are looking after children, through the award of child benefit—which also carries with it HRP, as my noble friend said, or, from 2010, the new credit. That credit can be switched to whichever parent needs it, provided that the child benefit is switched as well. The noble Lord, Lord Skelmersdale, will press that point in an amendment to which we will come shortly. In other words, the credit goes with the child benefit, as it is awarded in recognition that the parent is the primary carer of the child, usually the mother.
	However, there is existing provision for parents to relinquish their child benefit award. I assure noble Lords that HMRC, which administers child benefit, takes great care to ensure that parents or other child benefit awardees are aware of their right to relinquish entitlement to it in favour of the person who gives up work to look after the child. Certainly, some of the grandparents I have met are in receipt of child benefit. They are entitled to it because their children, sometimes for very tragic reasons, have given up the care of their child. It follows logically that if grandparents or other relatives take on the role of primary carer, they would be entitled to child benefit and the credit in their own right. The credit would run for S2P as well as the basic state pension, something not covered by the amendment.
	I neither underestimate nor undervalue the role that grandparents or other relatives can play in looking after a child. However, research suggests that the majority of those providing any childcare do so for just one or two days a week. I would distinguish the childcare that takes place in tragic circumstances following the death or effective loss of a child, perhaps through drug or alcohol dependency, from the casual support that people give their grandchildren.
	That statistic about caring for grandchildren one or two days a week on average gives credence to the view that most grandparents—or, rather, family relatives—do not generally perform the role of primary carer and may not therefore be disadvantaged when looking for work. On that basis, it would be wrong to award class 3 credits to the generality of grandparents rather than, as the Bill does, supporting those grandparents and others who are involved in caring.
	We have just discussed our plans for a new carer's credit. There is no reason why a grandparent should not be eligible for the carer's credit if they fall within the relevant criteria. For example, a grandparent might be providing care of 20 or more hours a week for a disabled grandchild to provide the mother with breathing space. Even if the mother is in receipt of carer's allowance for that child, there will be no reason why the grandparent should not be eligible for the carer's credit.
	In another situation, a person may be providing 20 or more hours care a week for their son or daughter, who is suffering from drug or alcohol dependency, as well as taking care of their children. In those circumstances, the grandparent could be eligible for the carer's credit for looking after their son or daughter if they were either receiving the appropriate benefit or the need for care was certified by a health or social care professional.
	Furthermore, by definition, today's grandparents were yesterday's parents. If they retire after 6 April 2010, they will benefit from the conversion of years of home responsibilities protection from 1978 onwards, in respect of their own children, into years of credits, and of course from the reduction to 30 qualifying years to help them qualify for a full basic state pension. As a result of the Bill, a combination of credits for being in receipt of child benefit for their children and subsequently credits for caring for their children, or the award of child benefits for their grandchildren, could mean that only a few years of intervening work would enable them to achieve a full basic state pension. This is a major change resulting from the Bill.
	In my view, there is a significant difference between providing care and looking after somebody. We have sought to protect the pension rights of someone providing significant levels of care, either as the primary carer of a child or a disabled person. That is not the same as looking after a child on an occasional or ad hoc basis. Of course there can be hard cases but I hope the examples I have given show that what we are putting in place will provide effective coverage. I have not dwelt on the practicalities of pursuing the route that my noble friend suggests, but there are clearly practical implications for establishing the credit, should the amendment be adopted.
	As I said, I do not underestimate the importance of the role of grandparents or indeed other relatives in modern families. However, I believe that the amendment would be a step too far in supporting grandparents generally for doing what they have always done—providing help and support for their families. In the light of this, I ask my noble friend to withdraw her amendment.

Baroness Hollis of Heigham: I thank the Minister. He is known colloquially—I think that one of his friends has said it—as the Minister for Grandparents, so I know how much he has taken to heart the plight particularly of those grandparents who are at the extreme end of pressured, dysfunctional families, where the parents are unable to take care of their children. If anybody can fight to help to improve their situation, I am sure that it will be my noble friend.
	I accept his points about the technical difficulties of the amendment. I accept that transferring across is not straightforward, which is why—I am sorry if I sound like a gramophone record—we really need Amendment No. 4, which would address the problem. If we cannot agree to Amendment No. 4, we shall have to find some other way and keep going after pockets of individuals with tailored solutions. I disagree with the Minister's suggestion that we might appreciate that we have in place "effective coverage for grandparents". No, we do not. What we have—I welcome my noble friend's remarks on it—is greater protection and support where either the grandchild or their parent is disabled. My noble friend's comments in that regard were very helpful.
	However, where a grandparent is engaged in steadfast caring for a child—I am talking about 20 hours a week or more on a regular basis—in, let us say, a rural community, where one is unlikely to be able to find alternative commercial care for a two year-old, I do not understand the distinction between caring and looking after. When I looked after my two year-old, I was caring and looking after at the same time. It is not a valid distinction. We are talking about somebody whose hours of committed, reliable caring are such that they take that grandparent out of the labour force to enable the daughter to be in it. At that point, the grandparent loses their income, because they are not receiving child care tax credit—that is perhaps a battle to be fought on another day—and their pension rights as well. I am afraid that nothing that my noble friend has said today gives me comfort on that front.
	He asked for some way of checking. We currently have a child care tax credit, which is a high-value payment, being worth £150 or more, and there is a fairly flaky audit trail on to whom it is being paid. Whatever system we have for that can certainly apply perfectly well for someone who is seeking merely to acquire a pension credit as opposed to an income payment. A district health visitor could make an occasional check while on a call that they would probably make at any rate on a two year-old at home. A GP could authorise it in a similar way. There are plenty of people who interface with the lives of those children, their parents and their grandparents if an audit trail is needed.
	If a parent, particularly a lone parent, is in work full time and has a child under 12, especially a child under five, we know that someone has to look after it. If the parent is not claiming child care tax credit, it almost certainly means that the primary carer is the grandparent or a family relative. If it was anybody else, they would be able to claim child care tax credit. Ergo, there is a grandparent involved; ergo, somebody is failing to achieve the protection that they would get through entitlement to a basic state pension if they were in the labour market. The problem that the Minister identified does not exist.

Lord McKenzie of Luton: Does my noble friend not accept that, under the 30-year rule, if somebody is a grandparent, even with the 12-year credit rule for their children, 12 of those 30 years are already covered? However extensively they are caring for or looking after—we could debate what those concepts may mean—children grow up. They will not necessarily absorb the whole of the rest of the working life of the grandparent. The 30-year contribution rule, together with the other changes—the de minimis provisions and the mixtures of credit and payments-in—makes a significant difference to the position of grandparents that my noble friend describes.

Baroness Hollis of Heigham: My noble friend is absolutely right that the 30-year rule would help, but he is assuming that only one grandchild is concerned, that that grandchild grows up and the grandparent can then go back to work. We are talking about perhaps two grandchildren growing up or two families, with two or three daughters needing help, particularly in rural communities. We could very easily be talking about a situation where the people concerned may bring up their own child and receive HRP, manage two, three, four or five years in the labour market and then, from age 50 to age 65, provide almost continuous child care for grandchild after grandchild. My noble friend can do nothing to help them except to ensure that they go into old age without a pension of their own.

Lord McKenzie of Luton: That really is not correct. If we examine the circumstances that my noble friend describes, presumably the grandparent is likely to be in work for a period before having children. That is not necessarily the case but it is possible—so there are opportunities there to build for the state pension. If the grandparent has only one child, 12 years' worth of credits will be earned, so if nothing else happened there would certainly be an entitlement to a proportion of the basic state pension. At that level it would not be the complete state pension. If you assume that after that period there was no engagement with the labour market and no other entitlement to credits, what my noble friend says is right—except that at least on that basis a proportion of the basic state pension would be available to that person.

Baroness Hollis of Heigham: I entirely agree. My noble friend is right that if that person has had a job there will be 12 years under the new regime under which they will acquire HRP protection as of right. They may at that point, for three, five or eight years—who knows—be in the labour market. However, the average age to become a grandparent is 49, which means half of those people become grandparents before that age and half after it. Obviously, some will be caring after the age of 60 or 65, but none the less a substantial number of women will find that the whole decade of their lives between the ages of 50 and 60 is taken up in childcare.
	I do not doubt that some women will be able to cobble together a 30-year record in bits and bobs, and I am delighted if they can. But they will not know that necessarily until the day before they retire, and they will not be able to buy additional years, which would allow us to help them to overcome the problem.

Lord McKenzie of Luton: They would be able to buy six years under the current arrangement, so that is another six years of entitlement to basic state pension.

Baroness Hollis of Heigham: Yes, but the point is that they may start caring at 50; they would hope to finish at 55, but their daughter may have another child and they may find themselves in a further caring situation. At 58 they cannot buy back the years that they have missed at 50 or 51, as my noble friend explained so clearly earlier.
	I do not doubt that some grandparents will be able to cobble together some coverage, but I am concerned about the ones who cannot or will not. This amendment is not the best way in which to deal with the issue, but it may be the only way in which to raise it, given the Government's reluctance to address other ways in which to deal with grandparents' problems. Grandparents who take on the bulk of childcare, possibly for a decade or more, for their children, lose out on their pension rights and, because they are not allowed to register as childminders, lose out on childcare tax credit, too.
	I am not comfortable that the amendment is the right form for this proposal because it would introduce technical difficulties about transferring across, but I am very grateful for the support that I have received. It has been a very wide-ranging debate. There is a problem to be addressed here. I am not saying that this amendment is the right way in which to resolve that problem—I am not persuaded that it is myself—but there is a problem here that women, particularly women in rural communities, low-paid women, parents of lone parents and so on, take on a responsibility for which they pay a very high cost. Some of them will find themselves without a full basic state pension when they enter official retirement. I hope that my noble friend will find ways in which to address this problem.

Baroness Howe of Idlicote: I should like to probe a tiny bit further. Clearly the Minister has addressed a lot of ways in which the group that we are discussing is being helped, especially with individuals with serious problems. We are dealing with a generation in which grandparents, particularly the older ones, are seeing a transition from a group who, like them, did not go to work, to a group who are automatically going to work. It is part of the routine; from day one they are beginning to earn their pension. Those grandparents are making an extra-special effort to help their children to ensure that they are in that position.
	I support what the noble Baroness, Lady Hollis, has said. We agree that the amendment may not be the perfect way in which to do this, but can the Minister think a bit longer about the issue and see whether there is any way in which he could address this particular point? This is a hugely important period of time for equal opportunities, in which grandparents are willingly playing a particularly heavy price.

Baroness Greengross: Will the Minister consider one other thing? Somewhere in the Bill could there not be a line that stresses that grandparents who care for 20 hours or more a week should not be discriminated against in terms of pension rights compared with non-family carers? I do not know whether that is the right way in which to do this—but if there were some line to that effect it would help enormously, because at the moment they are gravely discriminated against.

Lord McKenzie of Luton: With the force of argument that has been made, one will continue to reflect on this matter. However, unless I am missing the point, it is not right to say that grandparents are discriminated against in these provisions in comparison with non-grandparents. They are in exactly the same position.
	To recap on the journey that grandparents could take—even under the scenario that the noble Baroness, Lady Howe, outlined, which I do understand—a grandparent would presumably have the opportunity to start off in work at the start of their lives. They may possibly give up work when they have children, but then be entitled to the credit for 12 years—so there are two tranches of contribution towards the basic state pension. Even if for the rest of their life they were involved in caring for children in a way that did not produce any credits for them, under the provisions, they could buy the final six years—or any of those six years over that period. If you top that up—and those would probably be fairly unusual circumstances—quite a significant tranche of basic state pension would be available because of that. We need to keep this in context.
	I shall continue to reflect on the matter.

Baroness Hollis of Heigham: With that assurance, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.
	[Amendment No. 10 not moved.]
	Clause 3 agreed to.

Lord Skelmersdale: moved Amendment No. 11:
	After Clause 3, insert the following new Clause—
	"Review of pension credit entitlement
	(1) The Secretary of State may from time to time, and shall when required by subsection (2), lay before each House of Parliament a report on—
	(a) current rates and coverage of pension credit entitlement;(b) likely future rates of pension credit entitlement; and(c) such other matters as he considers to be relevant as affecting the present and future take-up of and eligibility for pension credit.
	(2) The Secretary of State shall lay such reports—
	(a) five years after the coming into force of Part 1 of this Act; and(b) thereafter at intervals of not more than five years."

Lord Skelmersdale: I briefly mentioned pension credit at Second Reading and I should like to return to the issue again now. When debating this topic, the Government are always quick to remind us about the benefits of the pension credit scheme. The system has the potential to do a lot of good for quite a lot of people, which is why we on these Benches have no intention of abolishing means-testing or the pension credit scheme, although improvements are badly needed.
	These benefits are often trumpeted by the Government to hide the unfortunate effects of pension credit on many other people—people who do not claim the credit to which they are entitled and see their small personal savings result in swingeing cuts of their benefit levels, and the huge number of people who will become subject to intrusive means-testing. Your Lordships will note that this is a problem that will persuade some people not to invest in the new national pensions saving scheme, but that thought will get further discussion later.
	There is no doubt that pensions credit is formidably—not to say intimidatingly—complicated. Every report and research study shows that the problem is getting worse. Nearly £2.5 billion goes uncollected, which means that more than 1.5 million pensioners do not receive what they are owed. Indeed, the problem is so bad that the Government calculate the cost of pension credit on the assumption that huge amounts of benefit will not be claimed and so do not need to be funded outside public expenditure. How magic!
	Means-testing is also failing those who do take up the benefit at that end. The current levels of means-testing, even after reforms in this Bill, will still leave 30 per cent of pensioners eligible for pension credit, and that is the best possible outcome. That is still 30 per cent of pensioners who have no incentive to save, because what money they can put aside will immediately be clawed back by the system and the Government.
	This amendment is not hugely radical. The Department for Work and Pensions already produces lots of information, and covers that information in an annual report. However, that is clearly not enough. We must be clear that the reforms in the Bill will reduce pension credit entitlement as promised and that take-up must be improved. I beg to move.

Lord Oakeshott of Seagrove Bay: The noble Lord, Lord Skelmersdale, made a brief but powerful attack on the evils of means-testing and I do not propose to duplicate his figures. However, given the scandal of 1.7 million or 1.8 million people—whatever the figure is—not receiving the pension credit to which they are entitled, the disincentive effect of means-testing and the problem for people under the national pensions savings scheme, I was a little surprised that he did not seem to feel that we should take stronger and bolder action to reduce means-testing. Be that as it may, we all agree that there is a problem.
	We on these Benches still have an open mind on the amendment. As the noble Lord said, the department already provides most of this information. I am not against the Secretary of State's making a regular report but I am not sure whether it is more appropriate to ask the Secretary of State to do another report or to ask a more independent body to do it. Perhaps we can return to that when we come to the provisions on the Personal Accounts Delivery Authority and our Amendment No. 111. We are thinking of having the authority do it so that it can specifically look at and link in the effect of means-testing, estimates of the amount of means-testing, and the effect that that has on whether people should be saving through auto-enrolment and so forth.
	The noble Lord's amendment and our later amendment both call for a number of other reports. We will have to wait and see how the discussion on other report-seeking amendments goes, because we do not want to create a report overload. However, I accept the broad thrust of this amendment. We will need further discussions before Report to see how hard we should press each of these report-seeking amendments.

Lord Fowler: I say in parenthesis that I was quite cheerful in the debate until the noble Baroness, Lady Hollis, revealed that the average age of grandparents was 45.

Baroness Hollis of Heigham: It is 49.

Lord Fowler: It makes almost no difference to the point that I was going to make. Having become a grandfather for the first time three months ago, I hope that the noble Baroness recognises the contribution that older grandparents can make.
	I strongly support this amendment and congratulate my noble friend on proposing it. It is one of the more important amendments that we have so far debated and potentially one of the most important on the Bill. However, I agree with the noble Lord, Lord Oakeshott, that it would be much better to have an independent commission do this type of review.
	My noble friend Lord Skelmersdale and I come to pension credit from rather different viewpoints. I think it fair to say that he was rather sceptical about it. I have always supported pension credit, and indeed Ministers have sought to embarrass me by almost always claiming my support for this proposition. The basis for my support was that it seemed to me entirely right that we should help those who had been unable to build up a pension of their own, through no fault of their own, to have some extra income in retirement. I never envisaged that it would become a permanent part of the pension landscape. The aim should be to give the opportunity to as many people as possible to build up an adequate pension, therefore doing away with the need for pension credit in the first place. That is what all our efforts should be about in this and other legislation.
	There is a more general point to be made about this and, as someone who was in the Department for Health and Social Security for six years, perhaps I may advise the Minister. The most important thing about some pensions legislation has not been the pre-legislative scrutiny; it has been the lack of post-legislative scrutiny—in other words, checking what has happened against what was intended to happen. The faults, difficulties and errors that occur can certainly come about because of a change of Government, as different Ministers from different parties come in, but one should not ignore the fact that they can come about also when a long-serving Government appoint a new Minister. Regardless of whether we are talking about a Conservative Government or a Labour Government, a new Minister is unlikely to think that the way of making his mark in his new department is to carry out effectively and brilliantly all the plans that were laid down by his predecessor. Ministerial politics do not work that way. I could give chapter and verse of my own experience in this and I am sure that the Minister and the noble Baroness, Lady Morgan of Drefelin, could give chapter and verse on the other side.
	It is vital that we have a means of checking how any of the measures which are passed are carried out in practice. This is entirely a non-party political point. Without such action, we run the risk of repeating some of the errors made in the past. The department will always take its priorities from the Minister who is there at the time. That is no criticism of it, but it could lead us into error. Whether the proposition is accomplished by this amendment or by the later amendments on independent commissions, the Government should, for their own interest, look very seriously at it.

Lord McKenzie of Luton: I thank noble Lords who have contributed to this debate, but I urge the noble Lord, Lord Fowler, not to keep going on about changes of Ministers at this juncture—it does not help one to concentrate.
	I thank the noble Lord, Lord Skelmersdale, for moving the amendment, which raises the important issue of future pension credit take-up. Much has already been said about this subject both here and in another place; however, I think we can all agree that it would not have been appropriate to allow means-testing to spread as it would have done had we not acted. Our package of reforms will result in a reduction of the proportion of pensioners eligible for pension credit. This amendment seeks to require the Government to produce five-yearly reports on pension credit which will be considered by both Houses.
	We have already set out our longer-term projections for pension credit entitlement under our reform proposals in the regulatory impact assessment which accompanies the Bill. There is a lot of information about how the projections have been derived. It is important that we monitor the extent of means-testing and the take-up and expenditure of pension credit, and such evaluation will be critical in ensuring that our reform project is on track. In that respect I can see the intentions behind this amendment. However, the amendment asks for a five-yearly report on information which is largely already produced regularly, usually annually. The DWP already publishes annual long-term estimates of benefit expenditure which includes pension credit. These estimates also feed into the Treasury report on long-term fiscal sustainability. Estimates of current and projected case loads are used to calculate these expenditure projections. We recently published these case-load projections and will continue to do so annually.
	Estimates of current pension take-up rates are included in the annual take-up of income-related benefits report published under the independent national statistics guidelines. The number of pension credit recipients is published quarterly on the DWP website. So we already regularly produce a comprehensive set of pension credit data, and it is important that we continue to do so for planning and operational purposes. I can therefore see no reason for legislation to require information that is already in the public domain to be reproduced in a single report and published only every five years. That would be a backwards step from what we have now. For those reasons, I urge the noble Lord to withdraw the amendment.
	I know that we are going to have a debate, as part of our consideration of the Bill, about the extent of means-testing and how that impacts on people's propensity to save, and I look forward to that. Simply because people are on pension credit does not mean that they cannot get good returns from savings. That would not apply to absolutely everyone in that situation. The long-term projection shows that something like 6 per cent of people on pension credit would be on the guaranteed minimum amount, which is the 100 per cent withdrawal category.
	A lot of information is already in the public domain and is published and produced regularly, and I am happy to commit the Government to producing regular updates of our longer-term projections of pension credit entitlement under reform, which fed into the RIA.

Lord Skelmersdale: I am extremely grateful to my noble friend Lord Fowler for his speech in response to my amendment. I was somewhat surprised by the last point that the Minister made. At Question Time today, the third Question was about the Olympics; the noble Lord was clearly jumping fences before he had arrived at them, which is probably a bad habit, certainly for a hurdler. Perhaps he has never been a hurdler; I do not know.
	It is all very well having little dribs and drabs of information scattered in miscellaneous reports, but that is no substitute for collating them. I accept the Minister's point about having such a report every five years, but I do not accept the fact that it is not needed because of the plethora of information that is already available and which he has committed himself to continuing to make available. I will consider whether to go further with the amendment. In the mean time, I beg leave to withdraw it.

Amendment, by leave, withdrawn.

Lord Skelmersdale: moved Amendment No. 12:
	After Clause 3, insert the following new Clause—
	"Report on contribution credits
	The Secretary of State shall present a report annually to the House of Commons on—
	(a) the number of carers in receipt of contribution credits;(b) the associated costs of contribution credits received by carers to the National Insurance Fund;(c) any proposals he may have for reviewing eligibility for contribution credits."

Lord Skelmersdale: I will be even briefer with this amendment, to give the noble Lord the opportunity to repeat the assurance that was made by his colleague in another place. It is clear that some tweaking is required to ensure that child benefit and the associated home responsibilities protection and contribution credits go to the correct parent.
	In the past, most parents—usually the mother—collected their child benefit from their local post office, which meant that the money was instantly available for the child's needs and was collected by the parent who handled the majority of the childcare. However, now that most benefits are paid by cheque or giro, child benefit is often paid to the parent whose name is at the head of the joint account, generally the one who is earning the main wage and who is not the main child carer. I was struck by the Minister in another place assuring the Committee that the Government's intention is to allow the parent with care to benefit from child caring credits. Does that extend to child benefit? It jolly well ought to. I beg to move.

Baroness Morgan of Drefelin: I think I am replying to Amendment No. 13. Is that correct? I will come back to Amendment No. 12.

Lord Skelmersdale: We have already done Amendment No. 12.

Baroness Morgan of Drefelin: No, we did Amendment No. 11. The noble Lord spoke to Amendment No. 13 but he moved Amendment No. 12. Does the noble Lord want to move Amendment No. 12?

Lord Skelmersdale: No. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Skelmersdale: moved Amendment No. 13:
	After Clause 3, insert the following new Clause—
	"Allocation of child benefit to the relevant parent
	If child benefit is paid into a joint account and allocated to a parent who did not wish to accrue home responsibilities protection or contribution credits, and the other parent wishes to have accrued home responsibilities protection or contribution credits, the Secretary of State must reallocate the qualifying years of home responsibilities protection or contribution credits, as the case may be, to the parent who wished to receive them."

Lord Skelmersdale: I have just spoken to this amendment; perhaps we can now have an answer to it. I beg to move.

Baroness Morgan of Drefelin: I am very happy to respond to Amendment No. 13.
	Noble Lords will already be aware that home responsibilities protection is currently awarded to a parent or person who is in receipt of child benefit, in order to protect pension entitlement. Currently, a person who is awarded child benefit can ask for it to be transferred to their partner. However, the individual must apply to transfer the child benefit award so that the transfer is completed within the first three months of a tax year—6 April to 6 July—to qualify for HRP for that year. As the noble Lord stressed, legislation does not allow the protection to be awarded retrospectively. In most cases, that operates successfully, but we are aware of a small number of cases in which a non-working parent misses out on HRP because their working partner receives child benefit. But for those affected—we have heard of only 80 appeals for 2005-06, which is a small number—the negative consequences on basic state pension entitlement can be severe.
	With the proposed replacement of HRP with weekly credits from 2010, the situation could be exacerbated because, unlike HRP, credits will count positively to benefit entitlement. To mitigate the effects, we intend to allow the new contributions credits to be utilised by the partner or parent who actually needs them; for example, in cases where the person awarded child benefit also has contributions from earnings but their partner does not. That measure was announced at Second Reading in the other place by my honourable friend, James Purnell, Minister for Pensions Reform.
	We made it clear in the delegated powers memorandum that the power to define those "engaged in caring" will be used to provide that important safeguarding measure for parents. It would apply to those reaching state pension age from 6 April 2010, the proposed start date of the coverage reforms. That safeguarding measure would allow HMRC, which administers child benefit, to deem that a parent is entitled to contributions credits throughout or for any part of a tax year in which they have a deficient contribution record if their partner, who was awarded child benefit, has a full contribution record for that year derived from paid or credited contributions and does not need the credits themselves.
	However, we will also extend the existing HRP regulations to ensure that the non-working partner can benefit from HRP awarded prior to 2010. The onus will be on the individual to tell us, either before or following the calculation of someone's state pension entitlement, that their partner should have been awarded child benefit. The customer will need to inform the Pension Service or HMRC that the wrong partner was allocated child benefit. They will also be required to provide supporting evidence, either before or following calculation of benefit entitlement, within the normal time limits. We will be working with HMRC to ensure that people are made aware of the new provision and how it may affect individuals' pension entitlement.
	While I am on my feet, and if I may be a little cheeky, I want to clarify a point about carers allowance. To be absolutely clear and put the question beyond doubt I should say that carers allowance, along with other social security benefits, can be paid only to people over 16. If I may slip back to another discussion, the Committee may be interested to know that the national carers strategy review has prioritised services for young carers and the setting of specific commitments to improve support for young carers. I thought that it would be helpful to the Committee to know that.
	Given the information that I have provided, I hope that the noble Lord will feel able to withdraw the amendment.

Lord Skelmersdale: I shall certainly withdraw it. I was extremely interested in the further information that the Minister gave me over and above what I gleaned from proceedings in another place. I shall study it with great interest. She appeared to say that, with the exception of a tiny minority, there was no problem in the reallocation of child benefit to the correct parent. I am delighted to hear that that is the case.
	As regards the new arrangements for carers credit, one rather wonders whether that is likely to be of the same low order. As I said, I shall study very carefully what the Minister said and, if necessary, come back at a later stage. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.
	Clause 4 agreed to.
	Clause 5 [Up-rating of basic pension etc. and standard minimum guarantee by reference to earnings]:

Lord Oakeshott of Seagrove Bay: moved Amendment No. 14:
	Clause 5, page 5, line 33, at end insert "including those claimed by British citizens abroad"

Lord Oakeshott of Seagrove Bay: This amendment concerns a very serious and persistent injustice which affects about half a million people. The reason we do not hear more about it is that most, although not all of them, do not have votes in this country. None the less it is an injustice that we need to address and begin to right.
	This amendment seeks to unfreeze the frozen pensions of British pensioners who have moved abroad. Many may have been there for 30 or 40 years and the real value of their pension has been eroded enormously in that time. We do not seek to bring them back to where they were but at least to stop the problem getting any worse by restoring the link to the pensions at the level they have now got down to. It is a modest amendment which none the less seeks to halt the decline and at least let those pensioners begin to share again in the rising pensions that their fellow pensioners in Britain enjoy.
	There is also considerable injustice as between different overseas pensioners depending broadly on where they have moved to and whether the countries to which they have moved have reciprocal arrangements with Britain. In the case of the European Union, pensioners are automatically entitled under reciprocal arrangements for their pensions to be upgraded. I pay particular tribute to Mr John Markham, who is an indefatigable campaigner, especially on behalf of the Canadian pensioners but of pensioners in other countries too. My honourable friend David Laws and I have had meetings and engaged in considerable correspondence with him.
	Now that we are moving to earnings linking, it is particularly unfair that the overseas pensioners in countries with these arrangements will see their pensions going up through earnings while under present arrangements the other half a million pensions will be frozen completely. I refer to the gap between those pensioners who live in America who get the uprating and those in Canada who do not. That gap will get even worse.
	There is support from other parties for looking at the pensioners' plight but so far, certainly in the debates in the Commons—we look forward to seeing what happens in this place—only the Liberal Democrat Benches are prepared to put forward any constructive proposal as opposed to just sounding sympathetic.
	There are particular problems affecting a small number, which I also ask the Minister to look carefully at. I refer to the small number of pensioners in the British overseas territories such as the Falklands and countries such as the British Virgin Islands, the Cayman Islands, Montserrat, Pitcairn and St Helena—dependencies with very close ties to Britain—who get no uprating. As I said, about half a million people are affected. We believe that almost half of those, about 240,000, are in Australia, some 150,000 are in Canada, 46,000 in New Zealand and 37,000 in South Africa. Pensioners in a number of other countries, including Zimbabwe, do not get the uprating. That is the scale of the problem. The amendment seeks to unfreeze those pensions. We believe that that is affordable. I should like to give a flavour of how these people feel by reading from a frozen pensioner in Australia—if I can put it that way—who has just written to me. He writes:
	"I am extremely grateful to you for your understanding of the plight [of] my fellow state pensioners ... Many are now very old and have been battering their heads against the political brick wall set up in front of them for thirty years".
	He adds that he is planning to come back to Britain. I shall tell the Committee in a minute where he plans to move back to as I think that it is relevant. He writes that he and fellow pensioners in Australia have paid in for many years for,
	"future indexed pensions, whether we liked it or not",
	and that the answers they receive from Ministers are an "insult to our intelligence". He adds:
	"My apologies. I meant just to say 'Thank You' but find my anger taking over. May Lord Jones recover his health".
	I am absolutely delighted to see that my noble friend, who made his maiden speech on this issue and is a worthy champion of these pensioners, is present. I look forward very much to hearing his speech. The letter continues:
	"We have very few friends fighting for us! Thank you again for your support".
	This gentleman tells me that he plans to return shortly to Long Hanborough. Unless my Oxfordshire geography is very much mistaken, that is in David Cameron's constituency. When the gentleman returns, we shall await with interest to see whether he is able to persuade David Cameron to show more sympathy than has been shown so far. I beg to move.

Baroness Turner of Camden: I, too, ask my noble friends on the Front Bench to consider this matter sympathetically. It is not the first time that this has been considered in this place. In the past the argument has always been advanced that the uprating applied only in countries where there were reciprocal arrangements. I received a letter from Mr John Markham, who has for some time lobbied on behalf of the Canadian Alliance of British Pensioners, in which he states that in the debate in the House of Commons the Minister stated that there was no need for a reciprocal agreement with the frozen territories in order to uprate/index pensions. If that is so, it seems to me that the argument about reciprocity disappears and that we are looking at two groups of pensioners, one of which has frozen pensions and the other of which does not; it has fully indexed pensions. That seems to me to be basically unfair and a situation which really should be rectified. Therefore, I hope that on this occasion we shall have a sympathetic hearing from the Front Bench.

Baroness Greengross: I, too, strongly support the amendment. Over many years I have met people who represent pensioners abroad. It is very sad that so many people who feel quintessentially British consider that this country has given them such a raw deal, particularly those living in Canada who see that just over the border in the United States the uprated pension is available. More people from this country join their families in Australia and Canada than come to settle in Britain from some of the eastern European countries, where this rule would not apply. That is grossly unfair and it is a terrible indictment of this country when people who have spent their whole lives working and paying towards a pension have their pensions frozen in this way when they retire. They see it as a total injustice—and I agree with them. I strongly support the amendment.

Lord Dearing: I, too, strongly support the amendment. It is some years since I raised this issue on behalf of some residents in Canada, who found it difficult to understand why the border should determine whether or not they received a pension. After all, they do not make reciprocal agreements—they have no power to do so—but it is iniquitous to reduce their pension year by year by allowing inflation to erode it. I cannot see the justice of that. The only further answer that I received, apart from that relating to reciprocity—and I listened carefully to the noble Baroness, Lady Turner—was, "It is not one of our priorities". I regret that that was not convincing to my correspondent in Canada. I hope that the Minister will say something better and more reassuring.

Lord Jones of Cheltenham: I support the amendment and wish that my noble friend and, indeed, the Minister would go further. I became aware of this issue when I represented Cheltenham in another place. The matter was first brought to my attention by a lady who wished to retire to Canada, where her only son lived. She found out quite late that her pension would be frozen if she went to Canada. She did not want to live with her son and his family, but she wanted to be nearby to see her grandchildren grow up. She did not wish to be dependent upon her relatives. She did not understand why her pension would be frozen and thought that there had been a mistake. She wrote to the then DSS and showed me the letters explaining the Government's position that she had received in reply. Frankly, I did not believe it at the time. However, further correspondence ensued and confirmed that on the day she would leave the United Kingdom to go to Canada her pension would have been frozen.
	She waited, expecting the then Government to change those rules, because she was convinced that it was a mistake, but nothing happened. She eventually said, "Look, I'm getting so old that I've got to go". She was 70 when she went to Canada, and she did not think that she had long left to live. I am pleased to say that she is now 80, having spent 10 years in Canada, but her pension has diminished in real terms over that time. She sends me regular e-mails. Some of them are stroppy and one of them described a recent tornado in Toronto—so she also keeps her eye on climate change.
	This issue has also been raised with me on my foreign travels, particularly by a vociferous Welsh butcher in Botswana. Perhaps I should declare an interest here, because my family owns a house in Botswana and it might be thought that I am pleading on my own behalf because I might retire to Botswana. I have no intention of doing so yet, but if reform of the House of Lords proceeds apace one never knows what might happen.
	I and my noble friend Lord Oakeshott have mentioned Canada, where the pensioners are well organised. They do not understand why the pensions of people living down the road in the United States of America are uprated, but their own pensions are not. I am told that two of my former constituents who worked at GCHQ retired across the pond, one to Canada and the other to the United States. They had worked in the same departments at GCHQ, at the same grade and had presumably made the same national insurance contributions. One of them receives the uprated pension and the other does not. That is not justifiable.
	Like my noble friend, I wanted to raise the issue of the tiny number of people in the British Overseas Territories. Answers to my Parliamentary Questions have indicated that the cost of getting rid of the frozen pensions issue for the relatively few people affected in the British Overseas Territories would be less than £0.5 million. In Treasury terms, that is loose change. I would like the Minister to look closely at that. We have heard about reciprocal agreements and I wonder how such an agreement might be negotiated with one of the British Overseas Territories. Presumably the Governor of St Helena or wherever would put on his feathered hat and say, "The people of St Helena require their pensions to be unfrozen". He would then have to take off the hat, move to the other side of the table and have a discussion with himself. That would obviously be ludicrous, but it might be good material for a "Monty Python" sketch, if "Monty Python" were still producing new sketches.
	I know that the Minister will tell us about the cost of unfreezing pensions. My noble friend's amendment is relatively inexpensive. Certainly, the unfreezing of pensions in the British Overseas Territories would be inexpensive and affordable. Before we reach Report, will the Minister get his department to produce costings for unfreezing pensions for all the relevant territories? We know that the estimate is £420 million a year, which would escalate each year as pensions increased, but can he produce an estimate of the cost of unfreezing pensions for the over-80s, who are most in need, like my friend Mrs B? What about the over-75s? Perhaps the Minister would produce a list of the potential costs relating to each age group.
	Now that the Minister, James Purnell, has said during Committee in the other place that it is not legally necessary to have a reciprocal arrangement before making such payments, presumably the Government can change their policy once they decide that it would be affordable to do so. I hope that the Minister in this House will provide some assurance that the Government are looking seriously at this issue.

Lord Skelmersdale: We have had this debate just about every year since I re-involved myself in what I still, rather old-fashionedly, call social security matters. I am surprised that we are having that debate again in the context of this Bill. The noble Lord, Lord Oakeshott, will not be surprised to hear that our position on these Benches has not changed and I would be surprised if the position of government Ministers had changed, because I do not believe that it has.

Baroness Morgan of Drefelin: This is my first run at this debate and I very much hope that I shall not be thought of as yet another brick in the political brick wall. However, I think that I shall disappoint the noble Lord who moved the amendment and those who spoke in support of it. John Markham seems to have been a very effective campaigner. He has put a great deal of work into this issue and I am sure that he has met my honourable friend, the Minister for Pension Reform.
	I wish to clarify the intention behind the amendment. I have assumed that, as was the case regarding a similar amendment moved in another place, the noble Lord's intention was for the amendment to cover all categories of state pension for those living abroad who are entitled to a UK state pension—in other words, to bring in those countries where the pension is currently frozen.
	As I am sure noble Lords are aware, UK pensions can be claimed anywhere in the world, and that has been the case since 1955. The UK arrangement ensures that those who have worked in the UK and built up entitlement to the state pension here should get it, irrespective of how long they have lived in the UK or where they choose to reside in retirement, and we do not plan to change that.
	We currently uprate state pensions abroad where we have a legal obligation or a reciprocal agreement to do so. During Second Reading, my noble friend outlined our policy for not uprating all UK pensions abroad and I will reiterate it today. It is a fact that we have limited resources and we need to prioritise our spending. Our main priority must be to pensioners living here: we want to ensure that they continue to see an improvement in their living standards. Of course, we must discharge our obligations to pensioners living in the European economic area and in countries with which we have a reciprocal agreement.
	Perhaps I may put the uprating of the state pension abroad in context. As we have heard, just over 1 million pensioners living abroad currently receive a UK state pension at an annual cost of around £2 billion. Of those 1 million, around 530,000 live in countries where we do not uprate the state pension in payment. These pensions cost around £830 million a year. The cost of uprating the pensions of all those living abroad who are entitled to the UK state pension would be considerable. As my noble friend said at Second Reading, it would initially cost an extra £420 million per annum to unfreeze pensions in frozen-rate countries and pay them at the rate that they would have been paid had the individuals concerned remained in the UK. This figure would rise year on year.
	Furthermore, if pensions in frozen-rate countries were to be fully unfrozen and backdated, with arrears paid so that each person with a frozen pension were treated as if he or she had never left the UK, it would cost in the region of £3 billion in 2007-08. I understand that that is not what we are talking about but I want to put it in context.
	To uprate only the amount of pension currently in payment would cost an additional £30 million if uprated by prices or an additional £35 million if uprated by earnings. These costs would of course rise year on year, and this option would not end the inconsistencies that have been described today. The differential between the pensioners who moved abroad many years ago and those who moved recently would remain the same. For example, if we decided to uprate the pension of someone receiving a pension of, say, £40 by last September's retail prices index, he would get £41.45. Those who moved last year and were receiving the full pension of £84.25 would receive the current full rate of £87.30. We would be open to exactly the same accusations as we face today if we adopted such an approach.
	As I am sure the Committee is aware, an application on this issue is before the European Court of Human Rights. We expect to hear from the court later this summer. However, we are firmly of the view that it is right to prioritise our spending on UK pensioners, pensioners in the European economic area and those in countries with which we have a reciprocal agreement.
	I am aware that the noble Lord, Lord Jones of Cheltenham, has tabled three Parliamentary Questions and that he has made a tremendous commitment to raising this issue and the concerns of overseas pensioners. I assure him that he will receive Answers to those Questions shortly. However, it should be noted that these territories do not form part of the United Kingdom, although they are under the sovereignty and formal control of the UK and have varying degrees of autonomy. With the exception of Gibraltar and the sovereign bases on Cyprus, the British Overseas Territories are not subject to EU law, but we have a reciprocal agreement with Bermuda to uprate UK state pensions.
	A major consideration in deciding whether to enter into a reciprocal agreement is the extent to which the advantages to be gained outweigh the cost of negotiating and administering the agreement. If we were to enter into a reciprocal agreement with other overseas territories, we would have to ensure that they had a broadly equivalent pension scheme to enable true reciprocity to occur. Given the relatively small populations of some of the territories, that simply would not be practicable.
	Additionally, we do not think it appropriate to single out the residents of British Overseas Territories with UK pensions as being any more deserving of the uprating provisions than those living in former colonies or Commonwealth countries. If we were to make an exception on the basis of a link or a former link with the UK, it would be extremely difficult to justify not doing the same for former colonies and Commonwealth countries where we do not currently apply the uprating provisions. Indeed, it would probably require us to uprate UK pensions globally.
	The noble Lord, Lord Jones, asked for additional information regarding the potential costs of uprating specific territories. I do not have the details to hand but I am very happy to continue the dialogue on this issue in whatever way will be of help.
	I appreciate that this is a disappointing response but I hope that the noble Lord, Lord Oakeshott, will consider withdrawing his amendment.

Lord Oakeshott of Seagrove Bay: I thank all noble Lords who have spoken. Everyone has strongly supported the amendment apart from the Government and the Official Opposition Front Bench. If anything, the person who chided me slightly was my noble friend Lord Jones, who suggested, in a very moving speech, that I should have gone further, but we on these Benches can only go as far as we feel is affordable at this stage. However, at least we are putting forward a clear and, as the figures given by the Minister made clear, eminently affordable proposal. We think that £30 million or £35 million a year is a very modest start and it would recognise the injustice that exists.
	The noble Baroness talked about people having worked and built up their entitlement to a pension in the UK. Is that not an entitlement to a pension in the same form as that received by people who have not left? An entitlement to a pension which is halved or more than halved over a period by inflation and by being frozen does not seem to be the same as an entitlement to a pension built up by working in the UK.
	With regard to the points that my noble friend made about overseas territories, I honestly did not feel that the Minister addressed the fact that there is no one to negotiate a reciprocal agreement on behalf of these few hundred people. It is not right to compare the situation with that of former colonies from years ago, because those colonies now each have their own Government and, if they wished to negotiate a reciprocal arrangement, as some of them have done, they could do so. However, as the noble Baroness pointed out—I shall read her speech carefully—that would not be possible or appropriate in the case of the overseas territories. Therefore, these poor people are completely and utterly stuck and I think that, in a way, she made my noble friend's case for him.
	I hope that the noble Baroness will specifically undertake to give my noble friend the figures that he asked for on uprating the pensions of 80 and 75 year-olds. It struck me that it was perfectly reasonable to ask for that and I hope that she will be able to supply the information before Report.
	As I said, we believe that we have made a very modest and affordable proposal. We shall certainly return to this matter at later stages of the Bill but, for now, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Miller of Hendon: moved Amendment No. 15:
	Clause 5, page 5, line 39, leave out from "Where" to "shall" in line 41 and insert "the general level of earnings is greater at the end of the period under review than it was at the beginning of that period, the Secretary of State"

Baroness Miller of Hendon: My throat is dry and I hope that my voice will not put the Minister off being kinder to me. I shall speak also to Amendments Nos. 16, 18 and 19 and I thank the Minister for his courtesy in discussing with me his objections to my amendments. I am sorry to say that after much consideration, and with the utmost respect, I feel that he simply is not correct. I hope I shall be able to convince him of that.
	Clause 5 is intended by the Government to restore the link between pensions and average earnings, a step that is supported by all sides of the Committee and by industry. This group of amendments in no way detracts from that objective. On the contrary, they are intended to strengthen the new system by ensuring that the necessary adjustments, from time to time, are calculated efficiently, impartially, accurately, transparently and, above all, without the possibility of any political interference, especially from the Treasury.
	As the Committee is aware, in the course of several Bills in which I have been involved over the years, I have argued—sometimes successfully—against provisions that simply depend on the Government's opinion or result, in effect, in government by ministerial decree. To that end, my amendments remove from the clause all elements that depend on the opinion of the Secretary of State and make the changes not only entirely fact-based, but indisputably fact-based. Amendment No. 15 removes from the clause the power of the Secretary of State to decide whether the general level of earnings has risen. It bases the operation of the whole of this important clause on the simple and patently obvious question of whether it has risen or not, rather than on a purely subjective test of whether it appears to the Secretary of State that it has or has not.
	On Amendment No. 16, proposed new Section 150A(2) in Clause 5 quite rightly requires the Secretary of State to lay an order before Parliament upgrading the pension in accordance with the general level of earnings. However, new subsection (3) immediately contradicts that clear provision by excusing the Secretary of State from performing that duty. I ask Members of the Committee to note the words,
	"if it appears to him that the amount of the increase would be inconsiderable".
	I repeat my objection to a decision about whether an increase is or is not inconsiderable being solely in the mind of the Secretary of State. In addition to that, by what standard is an increase to be regarded as inconsiderable? What is inconsiderable to a Secretary of State, earning perhaps £2,000 a week, may be substantial to someone subsisting on the state pension.
	As I said at Second Reading, I have some slight sympathy with the Government over the problem they are trying to resolve. I am sure that they recall with considerable embarrassment the outcry over the derisory increase of 75p a week in 1999. However, there is nothing to prevent the Chancellor of the Exchequer granting a higher increase than the bare mathematically calculated minimum. More than that, the subsection contains another and, to my mind, fatal flaw. If the increase is so inconsiderable as to be missed, there is no unambiguous provision to make up the expense in a later year, as the clause provides for the increase to be based on a specific year or a review period. In other words, once it has gone, it has gone. I suspect that that is intentional because the proposed marginal note to new Section 150A refers to "Annual up-rating". "Annual" would require an increase every year—the general level of earnings increases—and if it is not done in one year, I submit that it must be done in a later year.
	Amendment No. 18 deals with that and removes any possible ambiguity. It fixes the increase that can be ignored at a maximum of 99p a week or, as the amendment says, less than £1 a week. It also enables the Secretary of State to increase that figure of £1 a week by order from time to time. The amendment also makes it clear beyond doubt that the ignored amount can be carried forward to a subsequent year unless the Chancellor should have generously decided to override the mathematical calculation and to allow a higher figure.
	Amendment No. 19 simply provides for rounding off upwards instead of either up or down as the Bill proposes. Docking even a small sum a week may be trivial to most of us, but not to a pensioner who has to count every penny. I regard new subsection (4), as drafted, allowing rounding down, as the height of meanness and unworthy of a wealthy country.
	Amendment No. 19 contains the whole nexus of my series of amendments. It removes from the Secretary of State the power by means of some formula dreamed up by him to calculate the increase in the general level of earnings. At the moment, the Bill provides for the Secretary of State to calculate the increase,
	"in such manner as he thinks fit".
	He is not required to publish his methodology; or to use any recognised method; or to conform to any accepted independently published tables; or to be consistent from one year to another. This amendment leaves the sum to be calculated as a matter of course by the Office for National Statistics, an independent government agency. The Office for National Statistics publishes a monthly average earnings index and claims it is the key indicator of how earnings are growing. Why will the Government not bind themselves to accepting the findings of their own statisticians, but instead allow the Secretary of State to pluck some other figure out of the air if he is so minded? I hope that the Minister will explain.
	There is a precedent for using an independent table or index to determine the level of increase in earnings. That is to be found in the Government's Employment Relations Act 1999 where, for the purposes of Section 34, the figure is calculated by reference to the retail prices index also published by the Office for National Statistics. The Government are content to rely on an Office for National Statistics index for the 1999 Act, so the index of the general level of earnings, which the same agency produces, should apply to the present Bill.
	That reference brings me to the precedent on which the Minister, who told me in a meeting I had with him, he intends to rely. He calls into aid the Social Security Administration Act 1992 which contains the identical formula as is proposed in this Bill—ministerial discretion and "inconsiderable" increase et al. I now have the greatest respect for parliamentary draftsmen, but in this instance they have made a serious mistake by using the 1992 Act rather than the Government's more recent 1999 Act.
	I did not have the pleasure or privilege of being a Member of your Lordships' House when the 1992 Act was passed, otherwise I would have argued like mad with my colleagues against the extent of the ministerial discretion that was granted at that time. Much more importantly, in 1992 the Office for National Statistics did not exist in its present form and there was no index of average earnings. In 1999, it did exist and, quite rightly, the Government utilised the authoritative retail prices index that it produces. There is a major inconsistency between two of the Government's own pieces of legislation, the 1999 Act and this Bill. More than that, if under Clause 5 the Government were to produce any lesser figure than the Office for National Statistics' figure, I can confidently predict now that the Secretary of State will find himself in court before anyone can say "judicial review". It will be of no use, if that is his intention, for the Minister to reassure your Lordships that, of course, the Secretary of State will take the Office for National Statistics' calculations into account. The Minister suggested in discussion that the wide ministerial discretion will allow for flexibility. Flexibility is not what is required from the Government in this case. What is needed is consistency between the two Bills.
	Accepting my amendment would also restore some measure of confidence. We did not discuss that important fact when we met. The situation today is different. People have lost confidence in pensions. There have been too many sad pension stories and the result is that we do not want to leave matters to ministerial discretion—to what the Minister thinks and does not think. I do not want to make a political point on this, but the position of pensions has been severely battered in recent years. There is no reason why—except for obstinately refusing to acknowledge that a drafting mistake has been made—the correct formula should not be enshrined in the Bill and therefore automatically applied.
	While it is not for me, as a very humble Back-Bencher, to propose an amendment to an Act passed by Parliament when my party was in government, I believe that the Minister should take the opportunity to consider bringing the 1992 Act into line with the 1999 Act and should not take a step backwards by making us revert to an obsolete, 15 year-old precedent.
	Clause 5 is a key provision in the Bill. Its objectives are not disputed or contentious. However, the methodology is totally flawed and leaves its implementation entirely at the discretion of the Secretary of State. My amendment puts the implementation on an open, transparent basis. The Minister has to think that that is sensible. I beg to move.

Lord Skelmersdale: I added my name to my noble friend's amendment because I support it. The Bill gives the Secretary of State enormous control over how the uprating formula is to be calculated. Almost my first words today related to precedents, as the noble Lord, Lord Oakeshott, will remember. Precedents may be good, bad or ugly. I understand that there is a precedent for this wording in the Social Security Administration Act 1992 and that the legislation governing the retail prices index and pension credit uses this wording. However, as my noble friend said, there has recently been a new precedent in the Employment Relations Act 1999, which uses the wording that my noble friend's amendment lays out. I do not see why the benefits of being more precise in primary legislation, which is the fact in that Act, should not apply to this Bill too.
	I believe that the Government's refusal to lay out the formulas and amounts for uprating is unnecessarily hindering attempts to restore trust in pensions and in the Government's commitment to providing a more generous pension by uprating in line with earnings rather than prices. There are many ways in which the Secretary of State could use the current drafting to uprate pensions that, although technically correct, would be considered unduly stingy by most people. For example, questions of whether bonuses should be included or the wages of only a section of society, such as the private sector, will have a significant impact on the resulting numbers.
	The Minister will no doubt assure us that he intends to follow this or a similar formula anyway. However, if that is the case, why will he not consider putting a formula, such as the one in my noble friend's amendment, in the Bill? I am sure that the magic word "flexibility" is about to spring from the Minister's lips, but it is surely not appropriate in this situation, where numerous small changes to the method for calculating a pension will cause considerably more confusion and distrust than already exists. More importantly, it cannot be appropriate for two pieces of legislation that purport to do exactly the same thing to have totally different drafting.

Lord Oakeshott of Seagrove Bay: I would back the noble Baroness, Lady Miller, against a sore throat any time. We on these Benches support her amendments and I propose to speak mostly to Amendment No. 17, which is tabled in my name and that of my noble friend Lord Kirkwood and is similar in content.
	It is a very simple amendment that states that the level of prices means the retail prices index and the level of earnings means the average earnings index. These are simple, straightforward, well understood definitions, and we see no reason for leaving wriggle room. The Government—indeed, all of us—claim that simplicity and clarity should be the watchwords in pensions, and this is a simple example of where things can be simple.
	I am struck by the evidence of David Yeandle of the EEF, who is a practical, experienced and persistent lobbyist on pensions for his members, who are mainly smaller and medium-sized businesses. He says that they are disappointed that, as drafted, the clause gives the Secretary of State almost complete carte blanche to determine the way in which the uprating is undertaken. New subsection (8) in Clause 5 states that,
	"the Secretary of State shall estimate the general level of earnings in such manner as he thinks fit",
	as we have heard. Indeed, the Explanatory Notes let the cat out of the bag, stating:
	"In practice this means the Secretary of State will be able to decide which measure or index of earnings growth shall be used for the purposes of earnings uprating".
	The EEF considers that the current wording of the clause gives too much flexibility to the Secretary of State when implementing this important element of the package of pensions reform.
	I cannot see the reason for it. When people are planning their pensions and their future investments, it is very important that they know where they stand. The point of substance that the Minister, James Purnell, made in another place when he was talking about flexibility was that if the Government got into a situation, as has happened under previous Governments, where inflation reached 10 or 12 per cent, we would not want them to be tied in to a position that would make it harder to put that right; that is, he would want to cut again, effectively ending the link with earnings. That is very serious. I was a special adviser to Roy Jenkins in a Government in the 1970s when inflation got to 27 per cent, so I have a rather longer memory than James Purnell. However, with inflation at 10 or 12 per cent, I would not want pensioners to have their link taken away. Why should they be the ones to suffer? It is more than flexibility. If I read this right, the Government are genuinely saying, "We're restoring the earnings link, but only for so long as it suits us". That is very serious, and I ask the Minister to clarify the position and respond to the clear feeling of the Committee that we should know exactly where we stand, and so should pensioners.

Baroness Howe of Idlicote: I support the amendment. During my Second Reading speech, I drew attention to the importance of the inflation rate and I asked the Minister a few questions, which he did not really address in his summing up. It is clearly important that earnings rather than prices are the basis on which the changes are to take place. I, too, had a letter from David Yeandle, and I agree with the points that he made. I hope that a little more information on these points will come from the Minister because whatever the rate of inflation—and we are a bit worried about it at the moment—it will clearly make a huge difference to whatever decision we make about any aspect of pensions.

Lord McKenzie of Luton: I thank all noble Lords who have spoken in this debate. I say to the noble Baroness, Lady Miller, that I am sorry that her voice is troubling her, but she should be assured that it did not detract from the clarity with which she moved her amendment, even though it did not help me reach the conclusion that I should accept it.
	Clause 5 delivers our commitment to uprate the basic state pension and the pension credit standard minimum guarantee in line with increases in earnings. The arrangements for earnings uprating are a fundamental element of our pensions reform package, and I am grateful to noble Lords and the noble Baroness for giving the Committee the opportunity to discuss this matter.
	Earnings uprating is one of the big prizes in our package of reforms. We are determined to ensure that future generations of pensioners continue to share fairly in the rising prosperity of the nation, building on the progress we have already made in tackling pensioner poverty. The group covers arrangements that form part of the uprating process; namely, the measure of earnings growth to be used and the practices for paying and rounding increases in the relevant amounts.
	Amendments Nos. 15 and 16 and 18 and 19, tabled by the noble Baroness, Lady Miller, and the noble Lord, Lord Skelmersdale, work together to remove the degree of flexibility which the Bill gives to the Secretary of State. Amendment No. 15 would remove the need for the Secretary of State to exercise judgment regarding whether earnings had increased, and, in conjunction with the other amendments in this group, would place unnecessary restrictions on the Secretary of State.
	There is nothing new about benefit uprating. The first legislation which set out a process for an annual uprating exercise, and enabled rates to be increased by an order subject to parliamentary approval, dates back to the early 1970s. Before then, a separate Bill was needed each time the rates were increased. Although there have been some changes since then—for example, income-related benefits were brought into the arrangements—the process has changed very little.
	Just because we have done something in a particular way for many years, it is not the case that we must continue to do so. The major reforms in this Bill give the lie to that. However, in this case, the uprating process has served us well and has stood the test of time. Indeed, we will continue to use it for the majority of benefits which will still be uprated in line with prices. The Bill's provisions ensure that the same process applies to earnings-linked and prices-linked uprating.
	I appreciate that the noble Baroness, Lady Miller, has concerns about the apparent flexibility which the Secretary of State is given, and would therefore prefer to see every element of the process specified very precisely. As things stand, however, Secretaries of State have to act reasonably when they consider questions such as whether earnings, or, for that matter, prices, have increased. She noted that if the Secretary of State acted in an arbitrary way, the process of judicial review would be readily available. In practice, as noble Lords will know, the Government use published indices produced by the Office for National Statistics.
	That brings me to Amendment No. 19, which in part seeks to specify a precise index for the measurement of earnings. At Second Reading, the noble Baroness, Lady Miller, set out clearly her concerns about the flexibility which the uprating provisions give the Secretary of State. Accordingly, the first part of Amendment No. 19 specifies a precise earnings growth measure to be used for uprating—the average earnings index, including bonuses, for the whole economy for September.
	At this point, perhaps we should discuss Amendment No. 17, tabled by the noble Lord, Lord Oakeshott, as it also seeks to define in the Bill the measure to be used to uprate pension amounts as the average earnings index. However, I note that this amendment does not specify which average earnings index should be used—there are a number of them.
	I should point out that the amendment also specifies that in the case of prices it shall be the retail prices index. It may be that the noble Lord included this reference to support the approach of uprating by the higher of prices or earnings, but I do not think this approach is necessary. As I have already explained, there is generally nothing new about the uprating provisions in this Bill. We wanted the provisions in Clause 5 to be consistent with those that presently govern the uprating of the basic state pension for prices. The current provisions have been in place for many years and work very well. We see no reason why the earnings uprating provisions should not follow suit.
	Therefore, just as current arrangements give the Secretary of State discretion over the measurement of prices, the new provisions give the Secretary of State discretion over the measurement of earnings.
	I mentioned earlier that the Secretary of State relies on published indices produced by the Office for National Statistics. As all noble Lords are aware, the average earnings index has been used to uprate the standard minimum guarantee since 2003. In fact we use the headline three-month average figure to July for the whole economy, seasonally adjusted, including bonuses. A provisional rate is published in September, but we tend to use the October revision. Our current intention is to use this for earnings-linked uprating in the future.
	I note that Amendment No. 19 specifies the September average earnings index. Using the three-month average to September would severely affect our timings, as the provisional rate for September is not published until November. That timescale would not leave us with enough time to make the necessary system and legislative changes for the Secretary of State to meet the requirements to bring the new rates into force at the prescribed time. So, while the Government do and will rely on published ONS measures, we do not think that it would be wise or helpful to specify in primary legislation a specific index to be used for the purposes of uprating pension amounts.
	Flexibility needs to be maintained, as it is not unknown for the publication of particular indices to be suspended, although it is some years since that last happened. That happened when the ONS suspended publication of the average earnings index between November 1998 and March 1999. If history repeats itself and the legislation specifies that particular index, these benefits could not be increased. In practice, of course, that would be unthinkable. The very flexibility this amendment seeks to remove is vital in enabling the Secretary of State to make alternative arrangements.
	I know from Second Reading that the noble Baroness, Lady Miller, is aware of the provisions of Section 34 of the Employment Relations Act. Section 34 allows for the prescribed limits on payments and awards under employment legislation, such as unfair dismissal and redundancy payments, to be varied in line with the retail prices index. However, there are some important differences between increasing, or, indeed, reducing, the amount that employers are obliged to pay under that Act and uprating benefits. For example, under Section 34, payments can be increased or reduced only by the same percentage change in the retail prices index. Like Section 34, Amendment No. 19 dictates that pensioner benefits can be increased only by the same percentage as the amount of the increase in the relevant earnings index. So, in the scenario where the Secretary of State wanted to increase pensioner benefits by more than the increase in the relevant index, the effect of the amendment would be to tie his hands and prevent him doing so.
	Just as the current legislation gives discretion to uprate by more than prices, the new earnings uprating provisions give discretion to uprate by more than earnings. The Government have made use of this flexibility in recent years and uprated the basic state pension by more than the retail prices index on a number of occasions, meaning that between 1997 and April 2007 pensioners have seen a 7 per cent real terms increase in their basic state pension. I am sure noble Lords will agree that we would not want to prevent the Secretary of State increasing the basic state pension by more than earnings if he wished to do so. That is precisely what Amendment No. 19 would do—restrict his room for manoeuvre. Clause 5 provides certainty. We are legislating for our commitment on earnings uprating by replicating tried and tested provisions.
	The final section of Amendment No. 19 makes changes to the current well established arrangements which allow the Secretary of State to round up or down. The usual convention is to round to the nearest 5p. The amendment provides that increases are to be rounded to the nearest 10p. The provisions of the final section of Amendment No. 19 are replicated in Amendment No. 18.
	At present, the Secretary of State is required to review pension levels each year to see whether they have retained their value in relation to the general level of prices. If they have not, he is required to increase them. Legislation provides that this increase may be rounded up or down,
	"to such extent as he thinks appropriate".
	Although the legislation says that, in practice, the usual convention is to round up or down to the nearest 5p.
	The provisions in new Section 150A of the Social Security Administration Act 1992 inserted by subsection (1) of Clause 5 broadly mirror the provisions of existing Section 150. Section 150 gives the Secretary of State discretion to round up or down, and the rounding provisions at Clause 5 merely replicate current arrangements. Applying percentage increases to benefit rates rarely produces exact cash amounts, so rounding is a well established procedure.
	I should point out that pensioners do not necessarily lose out or gain as a result of rounding. Implementing the provisions means that in some years the rounding will result in the rounded figure being slightly higher than the calculated figure, while in other years the rounded figure will be slightly lower.
	As I outlined earlier, if the amendments were accepted, increases in pension amounts would be rounded up to the nearest 10p. That might sound fairly inconsequential, but a significant cost would be associated with that. It would mean that even small increases, including those of less than 1p, would have to be rounded up to 10p. Bearing in mind that this would be paid for 52 weeks a year to some 15 million pensioners, the costs would soon escalate. If we consider that in subsequent years the new amounts themselves would be earnings-uprated and subject to further rounding up, it is easy to see how costs would be compounded over time. Carried forward over four decades, we estimate that just one such occasion could add more than £1 billion to the annual pensions bill by 2050. I am sure that the Committee will agree that that is a considerable amount. To recap, the rounding provisions are not new. The current rule has been successfully applied for many years, and we have no reason to think that it will be any different for the rounding provisions in Clause 5.
	Amendment No. 16 would alter the provisions for not uprating where the increase is deemed to be inconsiderable. I have said previously that we intend the uprating process to follow the same pattern that we have used for price-uprating. It has been tried and tested. One of the longstanding features of the existing process is that, where the increase in a particular amount would be inconsiderable, it does not have to be paid. The amendment sets out in fairly precise terms the level of increase deemed inconsiderable or too low to pay. Such inconsiderable amounts would, if the amendment were carried, be carried forward to the following uprating exercise. The amendment puts that figure at anything under £1. As benefit rates are expressed weekly, that could amount to around £50 a year.
	I cannot say with any certainty what increase the Secretary of State would deem inconsiderable, as I am not aware of any occasion in the last 30 years on which an amount has not been increased on that basis. I think that I am on safe ground in saying that it would be considerably less than the £1 that this amendment stipulates. I have found examples of some individual benefit components that have increased, in line with prices, by as little as 15p or 20p after the increase had been rounded to the nearest 5p. Those increases were paid, so were clearly not viewed as inconsiderable. In reality, this rule would be likely to bite only if inflation, or the annual increase in earnings, were to fall very close to zero.
	Finally, I should point out a further important difference between the uprating provisions in the Bill and those of Section 34 of the Employment Relations Act. Under Section 34, payments are increased by statutory instrument using the negative procedure. Crucially, the annual benefit uprating order is subject to far closer parliamentary scrutiny and can be made only following a resolution of each House; so if Parliament ever considered that the Secretary of State had misused this flexibility, the solution would be in our hands.
	The noble Lord, Lord Oakeshott, asked me to comment on what my noble friend James Purnell said in another place. I do not know the precise context to which the noble Lord referred, but he may have been commenting on whether the uprating should be higher than prices and earnings. I think he was focusing on what would happen if rampant inflation outstripped earnings, although that has not occurred under the financial stewardship of this Government. If it did, there would be some serious issues for the economy to address. I believe that that is the context, but if it is not, I will certainly write to the noble Lord.
	I hope that my explanation will assure noble Lords that there is nothing sinister about our proposals for earnings uprating, and I urge the noble Baroness to withdraw the amendment.

Baroness Miller of Hendon: I thank the Minister for his very detailed answer. It was so detailed that I shall need to read it very carefully to ensure that I understood every nuance. I also thank the noble Lord, Lord Oakeshott, for his support. Interestingly, his amendment is very similar; it simply comes at the matter from a different angle. At this stage, because I have not read what the Minister has said, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.
	[Amendment No. 16 not moved.]

Lord Oakeshott of Seagrove Bay: had given notice of his intention to move Amendment No. 17:
	Clause 5, page 6, line 3, at end insert—
	"(3A) The general level of prices shall be defined as the Retail Prices Index.(3B) The general level of earnings shall be defined as the Average Earnings Index."

Lord Oakeshott of Seagrove Bay: On Amendment No. 15, I apologise to the Minister if I was wrong about what James Purnell said. I will re-read the relevant quotation and see if I was indeed wrong. On his point about the average earnings index, economists and those in the City generally use the term "average earnings index" for exactly the index that he cited; the headline average earnings index, including bonuses. That is the long definition of the average earnings index, so that is precisely the index that we have in mind. I will be quite happy if he wants to put the longer definition in the Bill, but the key thing is that it should be clear and should not be subject to ministerial manipulation.
	On the fair point that he makes about the problems with the compilation of the average earnings index between 1998 and 1999, which could in theory arise with any index, the answer is not to say that we will let the Minister decide. The way in which to deal with that temporary problem is to let the National Statistician estimate an amount on the best basis that they can, because they will be in the best position to do so. That is the answer to that, although I will certainly return to the matter on Report.

[Amendment No. 17 not moved.]
	[Amendments Nos. 18 and 19 not moved.]

Baroness Hollis of Heigham: moved Amendment No. 20:
	Clause 5, page 6, line 40, at end insert—
	"150B Annual up-rating of earnings disregards of state pension credit
	(1) The earnings disregards shall be raised to—
	(a) £20 for a single person's earnings;(b) £30 for the earnings of a couple; and(c) £40 where a single person or one or more of a couple—(i) qualifies for one or more of the following—(a) adult disability premium (whether or not the higher pensioner premium is applicable);(b) carer's premium or carer's allowance;(c) higher pensioner premium;(d) long-term employment support allowance;(e) severe disablement allowance;(f) attendance allowance;(g) disability living allowance;(h) war pensioner's mobility supplement;(i) disability or severe disability elements of working tax credit; or(ii) is a single parent;(iii) is or are registered blind;(iv) is or are a part-time firefighter;(v) is or are an auxiliary coastguard on coast rescue activities;(vi) helps or help to operate or launch a lifeboat; or(vii) is or are part of any territorial or reserve force.
	(2) The Secretary of State shall, before the start of the first tax year after the coming into force of subsection (1) above and before every tax year thereafter, review the amount of the earnings disregards in order to determine whether they have retained their value in relation to the general level of earnings obtaining in Great Britain.
	(3) Where it appears to the Secretary of State that the general level of earnings is greater at the end of the period under review than it was at the beginning of that period, he shall lay before Parliament the draft of an order which increases the amounts referred to in subsection (1) above by a percentage not less than the percentage by which the general level of earnings is greater at the end of the period than it was at the beginning.
	(4) The Secretary of State may, in providing for an increase in pursuance of subsection (3) above, adjust the amount of the increase so as to round the sum in question up or down as he thinks appropriate.
	(5) If a draft order laid before Parliament under this section is approved by a resolution of each House, the Secretary of State shall make the order in the form of the draft.
	(6) An order under this section shall be framed so as to bring the increase in question into force in the week beginning with the first Monday in the tax year following that in which the order is made.
	(7) For the purposes of any review under subsection (1) above, the Secretary of State shall estimate the general level of earnings in such manner as he thinks fit."

Baroness Hollis of Heigham: In moving Amendment No. 20, I shall also speak to Amendment No. 25. On Amendment No. 20, whatever we do when we debate social security uprating, which we do every year, we almost invariably fail to uprate disregards. I am hoping for support here from the noble Lord, Lord Kirkwood, who I know has been involved in these debates in the other place on many an occasion. Thirty years ago, the disregard for a single person in retirement was £4. Twenty years ago it was £5—£10 for a couple—and it has not changed since. It is worth less than an hour's work a week at the minimum wage for a single person, or an hour and a half or so for a couple if one of them is working.
	Amendment No. 20 would raise the level of disregard so that a woman in her 60s could, if she chose, clean for three hours a week, or a man could do two hours or so a week of gardening—I am sorry; these are very gendered examples—without endangering their pension credit. That is probably good for their health and for socialising with other people, as it gets them out of the house; it is certainly good for their income. I would argue that this is in effect a nil-cost amendment. Either people do not do the work because of the fear that it may jeopardise their benefits, or they do it for cash in hand and do not declare it, thus entering the territory of fraud. What they do not do is earn the money—we are talking about modest sums here—declare it, and then see it knocked off their benefit. Why would they bother? The amendment would allow us to revisit disregard levels. The Bill would remain unchanged, so the amendment would have nil cost. No additional benefit money would be paid out, and no one would have any benefit knocked off because they were declaring it, so far as I am aware. We would have helped to take some potential for fraud out of the system, which is a good thing, and helped modestly to improve the financial circumstances of retired people.
	Amendment No. 20 suggests a very modest disregard on earnings. Amendment No. 25 seeks to address a related issue—the disregard on capital. At the moment, one can trivially commute a small private pension worth up to £15,000 in total, which I calculate—perhaps the noble Lord, Lord Oakeshott, can help me here—would buy an annuity of less than £1,000. Pension providers would not be particularly keen to handle such small sums. In any case, it may be the only sum of capital that many people experience in their working lives, and it would allow them to get work done on the house, or whatever, when they come to retire. If they claim pension credit, the first £6,000 of any such sum is free. Thereafter, a notional income of £1 for every £500 is attached to the capital, which in effect wipes out the lump sum at around £12,000 to £15,000. The same notional rules apply to housing benefit and council tax benefit, but there we also have a very belt-and-braces approach—a capital limit of £16,000. This means that anyone with a small personal pension—say, an older woman who in years to come fails to opt out of a personal account—comes below the trivial commutation rules and can then find her pension is deducted almost pound for pound against income-related benefits, particularly if she is a tenant. So she should never have saved at all. She would effectively have been, through inertia, mis-sold a personal account pension because she did what we wanted her to do and did not have sufficiently detailed financial advice to discourage her from doing it.
	To avoid these problems, we need some headspace to make small pensions worth having. It is curious that we have quite stringent capital rules for private pensions. You can commute only up to £15,000 and only the first £6,000 is disregarded. Thereafter, you have a quite steep taper. We disregard it with quite tough rules for private pensions, but the same stringency does not apply to the basic state pension. If someone with a full basic state pension record carries on working, drawing the BSP may be deferred for, say, five years. At that point, a person can either take an enhanced basic state pension, worth about 10.7 per cent a year for each year, or have it rolled up into a lump sum which could be worth up to £40,000. I was party to this and I am delighted that we did it: we introduced the lump sum alternative precisely so that people who have never had the chance to accumulate capital might, as they go into retirement, have a lump sum allowing them to fix the roof, replace capital goods and so on, which would be great.
	Income from a deferred basic state pension is set against pension credit and other income-related benefits, and probably will cost most of a person's income-related benefits. It is a bad buy for most people who might otherwise be on benefits, just as with private pensions. But here is the anomaly: if a person takes the money as a lump sum, it is disregarded entirely, but it is counted if taken as income. Effectively, there is a £40,000 capital disregard if your pension sum comes from a basic state pension, but only a £6,000 capital disregard if it comes from a stakeholder or personal account.
	I do not want to take that lump sum disregard away from the basic state pension: I want to extend it to small private pensions, so that just as the BSP disregard encourages people to have extended working lives, so the private pension disregard could and should encourage people to extend their savings. Ultimately, I would like to see those capital disregards equalised and not taken into account for income-related benefits. Given the anomalies that we currently have, I hope that the Minister will agree. I beg to move.

Lord Kirkwood of Kirkhope: Provoked by the noble Baroness, I am happily willing to support these amendments. The noble Baroness is right. I spent a lot of time in the previous two Parliaments in another place looking at the whole area of disregards, not merely those targeted at and connected with pension credit. However, pension credit disregards have some specific problems. Apart from anything else, the upratings that the noble Baroness suggests would be not as expensive as if disregards were to be addressed across the whole system.
	The thing that the Government always slip out from under is the charge as to why earnings disregards have never been uprated since 1988. When income support came in the IS disregard was £4. All this time later, we are talking about £5. It seems strange that there is no recognition of the fact that over that period of time, leaving the amount of disregard at that level is bound to have an effect on people's incentives to go out and get a little job, particularly for those of the age group to whom this amendment relates. Ministers have discretion on this. It is understood that there is no statutory requirement. This amendment seeks to do that, which is right. The Committee would be well advised to give it serious consideration in the context of this debate right now. If there is no willingness to give statutory uprating, why on Earth are the Government not able from time to time to use discretion unless the policy, unstated, is to let it wither on the vine?
	That is strange for a number of reasons, including equity. If the Government are trying to encourage people to work for longer, certainly that would work with the grain of that important new policy, which the House would support because it is an integral part of the rest of this Bill. If we are to extend the age at which people claim their basic state pension, try to get people working and into the labour market, and be more active, it would be much more realistic to accept something along the lines of this amendment to promote that method of proceeding.
	I absolutely agree with the noble Baroness: people who do some of this work do not declare it. They would be stone mad if they did because it would prejudice their entitlement to benefits, which would get looked at again. It is a risk. No one defends the non-reporting of benefits, but it is a natural reaction if you are doing a little part-time job, involving a little bit of work helping someone in the village or down the road. I am sure that a big element of the grey economy comes from that direction simply because these limits have not been lifted for so long.
	We are trying to get more people into work. The Government have quite ambitious targets for the working-age population to get more people into work. It would not be competent to do this at length in this debate, but the whole area of disregards needs to be attended to in the fullness of time. On the face of it, going from £5 to £20 in one go looks like quite an ambitious jump. However, if you valorised the £4 from 1988 up to 2007, you probably would not get far away from the figures that the noble Baroness suggests in this amendment.
	There is equity in this subject. I am sure that both Houses of Parliament should have turned to it before now. In the context of a pension credit claim and disregard, it is particularly apposite to this Bill and debate. I cannot see for the life of me why the Government do not at least say, "Well, we will do one of two things. Either we will be sensible and use some discretion from time to time, and every three or five years give this a boost to keep it current and in kilter with what it was in 1988, or take the offer made in this amendment", which I support. There is a lot of logic to it. It is better because it puts a duty on Ministers, in a statutory framework with which we are all familiar for all other benefits of this kind, to uprate it as part and parcel of the annual statutory uprating process. This amendment is irresistible and I would take an awful lot of persuading that the Government do not need to do something about this urgently.

Lord McKenzie of Luton: I am grateful again to my noble friend Lady Hollis for tabling an amendment which enables us to discuss an important issue. Much has already been said about pension credit and the proportion of pensioners who may be subject to means-testing in the future, but this brings an added dimension by introducing to the debate the current treatment of elements of income and capital within pension credit.
	I shall respond first to the amendment relating to earnings disregards. It seeks to increase the amount of the earnings disregards that apply and would require the Secretary of State to review and uprate them in line with earnings on an annual basis thereafter. As my noble friend is aware, we recognise that some people nominally "in retirement" may wish to take up work and keep in touch with the job market, so a small amount of earnings are disregarded within pension credit. We disregard £5 a week for most people and £10 for couples, although in certain circumstances this can be £20.
	My noble friend suggests that these levels should be increased. However, pension credit is not intended for people who do substantial amounts of work. While we fully support the principle of working and recognise that for many "in retirement" this is a positive step, pension credit is primarily a safety net entitlement. Pension credit provides cash help for the poorest pensioners, targeting money to where it is most needed. In doing so, we look at people's income from all sources, whether employment, retirement provision, capital or savings, and provide a top-up to the level of the standard minimum guarantee—£119.05 a week, and £181.70 for couples. This may be higher if people are caring, have a severe disability or certain housing costs.
	As the Government have always made clear, the key priority is to ensure that everyone can be sure of a decent and secure income in retirement with a relatively generous minimum level of income guarantee, and this is what the guarantee credit element of pension credit provides. In addition, the savings credit rewards those aged over 65 with earnings, income or savings. Furthermore, pension credit is more generous than its predecessor as it does not have a limit on the number of hours someone can work and still claim pension credit. While I fully understand and appreciate what my noble friend is trying to do here, I should point out that raising the level of the disregards is likely to attract a considerable cost, particularly as this would have a knock-on effect for housing benefit and council tax benefit for pensioners. We would need to change those rules so that some people do not lose out as a result of these changes.
	I turn to Amendment No. 25 and its proposals with regard to trivially commuted lump sums. The amendment would introduce a new capital disregard in pension credit, housing benefit and council tax benefit for capital derived from trivially commuting a personal pension, an occupational pension, a stakeholder pension or a personal account for people aged 60 or over. The effect would be that such capital up to the current trivial commutation limit of £16,000 would be completely ignored when establishing entitlement to a means-tested benefit, and as it stands, this would be in addition to the current capital disregards that operate within these benefits.
	I shall start by setting out the current position. We already have generous capital rules for pensioners within the means-tested benefits. The pension credit rules are significantly more generous than those of its predecessor, the minimum income guarantee, which excluded pensioners with capital or savings in excess of £12,000. Unlike other means-tested provision, pension credit has no upper capital limit. We ignore the first £6,000 of capital, or £10,000 for those in care homes. This means that the vast majority of pension credit recipients, some 85 per cent who currently have capital below £6,000, do not have any notional income taken into account. For those with capital above £6,000, we assume income at a rate of £1 per £500 or part thereof, half the assumed rate of income under the minimum income guarantee. Indeed, my noble friend Lady Hollis outlined that.
	For the most part, housing benefit and council tax benefit rules for those over 60 are the same as the pension credit rules. However, they vary in one significant way—for housing benefit and council tax benefit, there is an upper capital limit of £16,000. This means that anyone with capital in excess of that sum would not be entitled to housing benefit or council tax benefit unless they get the guarantee credit.
	As I said a moment ago, the Government have always made it clear that a key priority has been to ensure that everyone can be sure of a decent and secure income in retirement, and these benefits play a key part in the Government's strategy to tackle pensioner poverty. We believe that the current structure of the benefits is successful in targeting money for those vulnerable and poorest pensioners who need it most, while at the same time rewarding those who have made modest provision for their retirement. As a result of our measures to tackle poverty, we have lifted 1 million pensioners out of relative poverty.
	Looking to the future, we anticipate a different picture. Our reforms to the state pension and state second pension will mean that more people will receive state pensions which will lift them well above the means-tested minimum at the point of retirement. By 2050 we expect only 6 per cent of the pensioner population to be in receipt of guarantee credit only, and around half of those will have additional needs. Further, this estimate does not take account of the impact of personal accounts, so the proportion could be even less.
	In terms of the trivial commutation of small pension pots, very little is currently known about either the number or the characteristics of people opting trivially to commute their pension. It is therefore very difficult to determine how people might behave in the future. Any attempt to understand the costs associated with the implementation of this amendment is somewhat speculative because of the difficulties in predicting how many people in the future will be eligible for, and then actually choose, trivially commuting their pension pots. As it stands, my noble friend's amendment raises a number of questions and issues that need careful thought and consideration. Aside from the cost issue, the amendment would create very different outcomes depending on the choices people make about saving. We need to be wary of inadvertently creating perverse incentives to save less. It would also introduce unnecessary complexity into the claims process for pension credit, housing benefit and council tax benefit based on the need to authenticate the origin of a portion of someone's capital.
	Clearly these issues need further thought. While I share my noble friend's concern to ensure that people with only limited funds to invest in pension schemes are not disadvantaged, it is important that we conduct further research on likely pension outcomes and interactions with means-tested benefits in a post-reform regime where private saving will be more accessible through personal accounts. Without this research, I do not think we should be seeking to tie ourselves to a solution that may not be the most appropriate. While both amendments are clearly aimed at providing additional support to those in low-income groups, we cannot consider them in isolation. The reform package, as presented, represents a carefully considered package of measures and one which is both affordable and sustainable. The measures already proposed will bring benefit to many of the poorest by ensuring that more people will have a full basic state pension that will be uprated in line with earnings, and greater coverage of the state second pension. It will also see the earnings link for the standard minimum guarantee with pension credit continue into the future. Taken together, these measures will provide a solid state foundation on which people can build their retirement plans. We therefore do not want to add to it at this stage. Accordingly, I ask my noble friend to withdraw the amendment.

Lord Oakeshott of Seagrove Bay: My noble friend made a powerful point about the sum of £4 a week frozen since 1988. Can the Minister check the figure and let us know what that sum would have risen to by now, using any average earnings index he likes?

Lord McKenzie of Luton: I shall be happy to do that. However, I recall from our debate on benefits uprating a few months ago that some of those disregards have been uprated. It is not right to say that they have all been frozen. Does the noble Lord require the seasonally adjusted figure?

Baroness Hollis of Heigham: We are talking about the cold weather payment. I am grateful to my noble friend for his careful reply and I thank the noble Lord, Lord Kirkwood, for his contribution. I share with my noble friend my support for what pension credit has done to address pensioner poverty—it has been terrific. In 1997 a pensioner would have had £67 a week; today they get over £119. That has been transforming, and as my noble friend has often told the House, a pensioner is no more likely to be poor than any other member of society, thanks to pension credit.
	Having said that, I think that two issues divide us on Amendment No. 20. The first argument put by my noble friend is that because pension credit is sufficiently generous, which it is compared with previous levels of financial support for pensioners, it follows that pensioners do not need an earnings disregard. But those are actually unconnected. I can see how the argument would apply to someone of working age, perhaps a young man in his 30s, where one is seeking instead not to make it so comfortable to remain on benefits plus disregards that he never seeks a full-time job. I understand that argument. It may not be a view I always share, but it is understandable. However, it does not apply here. We are not talking about large sums, perhaps £20 a week for a single person, given that most people on pension credit guarantee by definition are single. Working for a few hours a week produces a degree of comfort, social life and interest. It is desirable that people should pursue that. The fact that pension credit has become more generous does not answer the point that, at the risk of sounding pious, people feel the need to be useful, to be valued, and to play a full part in society. Doing a modest part-time job is a way of achieving that. We should be encouraging such efforts, as well as the extra income they produce.
	The second point made by my noble friend on Amendment No. 20 was that this would cost. I do not believe it. Can he tell me—I am sorry to do this, but he did run this argument—how much we now dock off the benefits of people who have an earnings disregard that exceeds the figure? Could he give me some idea of the figure for people who declare it and we dock their pension? I bet none. I bet the figure cannot be calculated because it is too low. It is a psychological point. People who have small jobs tend to take cash in hand, do not declare it and, as a result, we carry on paying out exactly the same money. All we do instead is build fraud or the grey economy, in the words of the noble Lord, Lord Kirkwood, into the system. I stand to be corrected, but I do not believe that these costs exist. The notion that there would be additional costs—that additional moneys would be paid out that currently are not being paid out—is simply, if I may suggest it gently, nonsensical. It gets the psychology of this the wrong way round.

Lord McKenzie of Luton: My noble friend presses an interesting point. I have not seen any particular figures and neither has she—we will have to see what is available—but even if there were no figures available, that does not mean to say that no costs would be involved.

Baroness Hollis of Heigham: Can my noble friend say what those costs would be? For instance, someone who may have the opportunity of a three-hour-a-week cleaning job can either say, "No, because it will come off my benefit", or, "Yes, but I will not declare it", in which case their benefit is paid. The third option, which is that they take the job, declare it and that is docked off pension credit, seems to me implausible. I have seen no evidence of that at all. Perhaps my noble friend can tell me how he thinks a cost would arise.

Lord McKenzie of Luton: Effectively, it would arise from the latter circumstance. The proposition that there is no one in the UK who would declare that they had earnings in respect of the disregard does not seem particularly plausible either. We are dealing with hypothetical examples here. I acknowledge that getting hold of the figures might be difficult, but to assume that there would be no cost involved is not reasonable either.

Baroness Hollis of Heigham: I am sure that there is at least one retired clergyman who would declare it, but my noble friend must surely accept that we are dealing with unquantifiable costs, because they are so minute. That is not how the psychology of this would work.
	As to Amendment No. 25, my noble friend again said that pension credit was very different from other benefits because it had no upper cash limit on the level of capital. That is, of course, true, but only in a notional sense. Although the first £6,000 is clear, thereafter you deduct £1 for every £500, which means, effectively, that you run out at between £12,000 and £15,000. So you do not need a capital limit because the notional income will get you there at any rate. Although his words are true that there is no limit, in practice there is because pension credit effectively means that, if you have capital of more than about £12,000 to £15,000 a year, the notional assumed income that derives from this will wipe out your eligibility for that pension credit.
	My noble friend did not refer to the comparison with the basic state pension, an issue that intrigues me on all these commutation issues. I do not think that he picked up the point in his response. It is not easy—we all had wet towels wrapped round our heads when we were trying to work out what this might imply—but if someone defers for five years and takes that deferral as income, it costs them their pension credit. If they defer for five years and take exactly the same sum as a lump sum, it costs them nothing at all; it does not affect their pension credit one iota. They have a disregard for up to £40,000, which is great, but there is an anomaly to be addressed, not only within the basic state pension but in the read-across from the basic state pension to the private sector pensions.
	My noble friend has not addressed this issue today and we may or may not revisit it, as the case may be. I do not have easy answers for it because I do not want to knock the notion of people coming into retirement with a lump sum that they have earned, but I suggest to my noble friend that his argument on this was not persuasive. However, given the time, I am now in a position to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Morgan of Drefelin: I beg to move that the House do now resume. In moving the Motion, I suggest that the Committee stage begin again not before 8.35 pm.

Moved accordingly, and, on Question, Motion agreed to.
	House resumed.

Health: Sports Medicine

Lord Addington: asked Her Majesty's Government what steps are being taken to make sports medicine more readily available through the National Health Service so as to support healthy living programmes, particularly those aimed at combating obesity through greater physical activity.
	My Lords, I thank all noble Lords who have decided to put off having dinner or have scrambled it hurriedly to speak in the debate.
	I have always considered that the subject of sports medicine is not taken seriously by the department, not because of a lack of will but simply because it did not appear on the radar targets until comparatively recently. It smacks of sport and thus has nothing to do with the Department of Health. The silos between the departments are starting to break down but each department regards sport as not being in its bailiwick. The noble Lord, Lord Hunt, basically agreed with me that bringing in sports medicine is almost a no-brainer, if you like—I doubt whether that was the parliamentary expression used—because it is part of the preventive healthcare scheme; it is a part of national health. Hence the fact that we are encouraging and helping people to take part in physical activity.
	I stress that this is sports and exercise medicine. The basic discipline is to make sure that people know how to exercise and, more important, that they receive "repair work" help, to put it at its most basic, when something goes wrong. Why is this important? One of the big health scares at the moment is obesity and the fact that we are all getting larger. People, particularly those in the lower economic groups, are not taking exercise. This is probably because the sporting activities available tend to be middle class. It costs money to join gyms, it costs money for membership fees and you often have to travel to take part in the activities. You also need to have money to stay in the sport because you need support when things go wrong. I have said before in the Chamber that I have met people who have stopped playing certain sports because of their fear of an injury that could lead to their losing their livelihood. This group may be declining statistically, but we should still pay attention to it.
	How do we get the help that this group needs? We should concentrate on sports and exercise medicine and its delivery. When you start to consider sports medicine, there is a grave danger that you can get sidetracked into a great many websites—I know that I did for quite a while—but let us consider the Olympics. The elite professional end of the sports medicine structure is reasonably well taken care of. Groups are investing in athletics or the athletes themselves, who are valuable people in a professional world. In association football, players are incredibly valuable pieces of cattle, effectively. If a person breaks down, it matters and he gets the right help. A person who attracts a great deal of national prestige—an international athletics competitor, for example—would have access to help. Such people, statistically, have had the best access for a long time. Most people in the higher economic groups have access because they can pay for it themselves. I refer to the amateur athlete who wants to make sure that strains, pulls, bumps and bangs are dealt with. The problem comes with those people who may not have as much money or knowledge and are dependent on the NHS.
	I have mentioned before, and I believe that the noble Lord, Lord Hunt, agreed with me, the idea that if you get a bump on a Saturday or Sunday, you go to casualty, but if it does not require immediate attention—for instance, a break that requires surgery—they will say, "Don't worry about it, go home, and we'll put you into a clinic at some point to receive physiotherapy for your soft tissue injury". Then what happens? You wait a week or two. The injury is not improving, if it is at all serious. If you have remained inactive, you have weakened your muscles. Ligaments and tendons are tending to shorten. Effectively, not only do you have the injury but you have physical deterioration around it. Fitness will also go down, so you will not heal quite so fast. We must find some way of getting enough expertise quickly to people.
	My question for the Minister is: what is the thinking about trying to get these groups that cannot pay to people such as physiotherapists more quickly? Is there some way in which the first port of call would be not a GP but a physiotherapist, or at least could the GP make sure that the person got to a physiotherapist very quickly? What is important is not just the help that a physiotherapist or a doctor in sports medicine can give, but the exercise plan and the amount of treatment that can be self-administered—for instance, the right type of exercise and stretching. When do we get the expertise and back-up? It is worth remembering that, even if you happen to be an enthusiastic rambler, you are still quite capable of slipping and twisting something—your ankle, knee or whatever. It is not just sportsmen who are affected; all forms of exercise have the same pressures.
	My noble friend has more exact figures than I have been given, but the advice that I have had from experts in the field is that there is no seedcorn money. There is not enough central training to get a significant number of junior specialist doctors trained in exercise medicine—the figure that I was given was a target of under 50 in about a year's time. If we are going to try to keep people active and provide them with advice about taking up and getting involved with exercise, that is a ridiculously small number of doctors nationally.
	There is also the problem that we have something of a postcode lottery. Nottingham and Sheffield are two of the areas that have some input from the National Health Service and, according to the briefing that I am holding in my hand and ignoring half the time, centres of excellence are building up. But unless you plan to do all your exercise and then get injured in one of those places—the Royal College in London is another such centre—what use are they to you if you cannot get access to them, and quickly?
	I am trying to get the Government to give me some idea of their thinking on this subject. How are they going to address the fact that we are not helping people to help themselves? As I have mentioned, rehabilitation is probably the first thing, but the second is that we are encouraging people who are overweight or who have been inactive back into exercise. I had a letter from Slimming World this morning—whether that was personal or not, I am not sure; I think that it was about something parliamentary. Regardless of what people do in trying to lose or control weight through exercise, it is vitally important. I indulged myself tremendously at one point in an eight-minute rant against the body mass index, a medical term that was used for a long time, which ignores the basic fact that muscle is smaller and heavier than fat. My favourite example was that Pinsent and Redgrave were not obese but simply very heavily overweight when they were in their last boat together. They are over six feet four inches, I believe. A height/weight chart just does not work.
	How will we provide information to the medical profession generally that will enable it to refer on to the existing resources? That is something else that must be addressed. Enhancing the status of sports medicine may enable the NHS to take some pride, and a trickle-down effect may result from having more status at the centre. In making such information more readily available throughout the system, we would be dealing with many of those problems as well.
	I will curtail my remarks, except to say that this is primarily me saying to the Government: back up your 2002 White Paper, Choosing Health, your 2004 Chief Medical Officer's report, AtLeast Five a Week, the healthy living programme and the Wanless report, Securing Health for the Whole Population, by giving support to those doctors and groups who are trying to make people healthier by making it easier for them to help themselves.

Lord Giddens: My Lords, I congratulate the noble Lord, Lord Addington, on having initiated this debate and commiserate with him that the response has not been as large as it should be. If he will forgive me, I should like to interpret the debate on a fairly wide basis. I shall talk about sports medicine and also about combating obesity through physical activity.
	As the noble Lord said, the issue of measuring obesity is not straightforward. It is quite a debated issue. On the other hand, it is difficult not to accept the fact that the rising incidence of obesity and people being overweight is a fundamental health problem for our society and for many others. If you look across the world, it is plainly not just an issue for this country. There are not many respects in which the UK can be said to be ahead of other EU countries, but one trait of which that is true is that we have more people in prison than other EU countries do, and another is that we have more people who are obese.
	This is a global trend. We are still lagging a bit behind the world champions, the United States. Recent material on Japan shows that it had the highest levels of longevity and overall good health in the world, mainly sustained, so far as we know, by the diet that people followed there. Now there is a massive increase in obesity, especially among people under 21. That is the most rising curve you could have seen, associated largely with the introduction of fast food into Japan but also quite directly correlated with physical activity.
	The health consequences of all this are very strong. There have been discussions about the issue in the United States. It has been said by some specialists in the medical services in New York that obesity and other eating disorders could swamp the health system some 15 to 20 years down the line just because of the incidence of diabetes type 2 alone, leaving aside heart disease, cancers and other illnesses that are the result of this tremendous secular change in the physical health of the population.
	I argue that this is part of a wider agenda of politics that we should give our attention to, which I describe essentially as the politics of lifestyle and contrast with the traditional welfare state. It has a lot of implications for the question of sports medicine itself, but also more broadly for how we attack these issues of exercise in relation to public health. In the past the welfare state and the NHS were primarily designed as insurance systems. They were concerned with picking up the pieces after things had gone wrong. If you get ill, the welfare state will help treat you. If you become unemployed, the welfare state will pay you unemployment benefits. If you have the misfortune to get old, the welfare state will pay you a pension. The welfare state and the NHS have been traditionally defined mostly as a kind of safety net, picking up the pieces. However, I do not think that that approach—and this does have a bearing on sports medicine—is possible to sustain any longer, not as a single approach to how we understand welfare and try to relate to the lifestyle practices that people follow. We must have a much more investment-based welfare system; we must invest more in children, as the Government are trying to do, and invest much more in positive health rather than in just treating people once they have become sick or ill.
	The statistics on inequality in health bear this out very clearly. Health inequalities in this country between more affluent and poorer people have actually been increasing rather than decreasing. The reason for this is not traditional poverty but changes and differences in lifestyle behaviour. We have had a big transformation, going from an industrial manufacturing base to a knowledge and skill-based or service-based society. When 40 per cent of the population worked in manufacturing and another 5 per cent, 6 per cent or 7 per cent in agriculture, poorer people, especially men, undertook a great deal of physical activity in their everyday lives. Most of that has disappeared—someone working on a supermarket check-out does not get much natural exercise in the course of the day. The rise of obesity and other health problems is related to that, but it is also plainly related to class differences, type of diet, and in the propensity to take exercise and to smoke. Some of the most difficult issues in trying to produce a more egalitarian society are located there.
	In a general way, the Government have responded quite strongly to these issues. There has been plenty of action around obesity and participation in sport. For example, the Government, working in conjunction with Sport England, are proposing to increase participation in sport by some 2 million people by the year the Olympics will take place, although it is not clear whether we are on track to achieve that.
	We know that people's behaviour can change. This has been achieved in Finland, which had some of the highest rates of heart disease and other diseases in Europe, as a result of eating a high-fat diet, especially people in rural areas. But as a result of a series of programmes, based mainly on incentives rather than constraints, this was radically changed. Finland has become one of the healthiest countries in Europe, with one of the lowest levels of heart disease. So we know that it is possible to make changes, and it is plain that sport has to be a core part of that, which I take to be the centre of the noble Lord's Question. He set out the issue of sports medicine very clearly and I do not want to repeat it. If we are to have a healthier population, which we must have, it is surely important to bring sports medicine into the core of available forms of treatment, especially in the NHS. More affluent people can get such treatment easily outside the state-based medical system. We are talking about reproducing the very inequalities I have been describing.
	I am afraid that sport is inseparable from injury and strains. It is true that people give it up if they do not get the right kind of medical attention. We should pay special attention to women, alongside men. I would not mind my noble friend commenting on this. We have to achieve a much higher proportion of women taking part in sport. The UK is lagging miles behind several other countries where girls are overtaking boys in sport as they have in education. More women than men are taking part in sport and physical activity in some countries. In this country, women are a long way behind in participation. Sports medicine has to apply to women as well as to boys and men and there is still a sexist residue in terms of treatment. There should certainly be gender-neutral opportunities within the health system.
	One point I have about sports medicine links in to what I was saying about the welfare system. I do not know what the noble Lord, Lord Addington, had in mind when he used the term "sports medicine" but I do not think that treatment should simply be after the event. To sustain a fit population and get people involved in sport, there needs to be investment in a lot of other more generative forms of treatment, including things that can help people be and stay fit. After all, affluent people use massage and physiotherapy to stay fit and to avoid sports injury, and we should be considering those things under the auspices of the NHS.
	These issues should be dealt with by third-sector groups, as well as just the NHS. The principle applies across the board with welfare. I have come to the end of my time but I would like to end with a joke. I was asking people beforehand to laugh at it; this is the smallest audience I have ever told a joke to.
	A guy researching old age in the US came across this wizened fellow, all bent over, rocking in his chair on the porch. He asked, "How long have you lived here?" and the man said, "I have lived here my whole life". The guy asked, "What kind of life have you led?" and the man said, "I've smoked every day of my life: I've eaten junk food every day and I never take any exercise. I just sit here and rock in the sunshine all day". The guy said, "That's amazing. How old are you?" and the man said "35".

Baroness Barker: My Lords, I congratulate my noble friend Lord Addington on securing this debate and on the persistent and dogged attention he has given this subject. He has a bit of the Geoff Boycott determination to see this through.
	It is important to be clear at the beginning that we are talking not about the small subject of treatment for elite athletes. Approximately 700,000 people suffer a sports injury every year. In addition, RoSPA notes that about 87,000 people suffer accidents as a result of gardening and DIY. Their injuries can be very similar, requiring surgery, physiotherapy and rehabilitation. In addition, there are some occupations where physical injuries are an occupational hazard. Police, firefighters and builders, for example, are prone to these sorts of injuries.
	The timely treatment of injuries does not only mean that people who have been taking exercise continue to do so. Research in this area of medicine shows a knock-on effect in that it can lead to a better understanding of issues such as muscle strength and balance in older people, and the prevention of falls. That is perhaps a related cost that we do not think about when we talk about sports medicine.
	My noble friend is right that most people who sustain an injury go to their GP or A&E as their first port of call. If they are lucky, they may happen upon a practitioner with a special interest, but most people do not. Because the level of rehabilitation and aftercare is low, there is a consequent economic loss, with people going on to suffer conditions such as chronic lower back pain or low-level disability and sometimes they do not return to work. The Minister's colleagues in the Department for Work and Pensions will know the extent to which that failure to treat people has a consequence for unemployment and underemployment. That is a huge economic drain on the country, especially in terms of incapacity benefit payments. When the Government come to do their accounts and their cost-efficiency reckonings, perhaps a bit of cross-departmental calculation might yield some interesting figures.
	The new sports and exercise medicine qualification is a welcome development, It will be particularly valuable if it is available to NHS consultants, specialists in private practices and GPs—perhaps GPs with special interests working with A&E teams to develop their skills and those of the acute sector.
	Private practice requires a little attention. Many high-quality facilities exist, often associated with major sports clubs, but there is a question about their overall quality. From time to time, one reads about footballers who come to this country from France, Germany or Italy and bemoan our standards of physical training, physiotherapy and rehabilitation, even in the Premiership. It is worth noting also that when England internationals—I can say this because I am a Scot—sustain an injury, they always seem to be flown off to the United States of America while the rest of us are left reading the Sun and resorting to prayer. Given that we have in the NHS the largest possible range of specialists working together in disciplines such as nutrition, physiotherapy and musculoskeletal medicine, it seems strange that we are not further ahead in sports medicine. We are only just starting to address it at the elite end.
	For individuals who have sustained an injury, getting access to the right treatment at an early stage is a critical factor which determines how well they will recover. However, finding the right people, and knowing that the treatment that one receives is correct, is often a matter of luck based on personal conversations and recommendations. I know that chiropractors and osteopaths are increasingly regulated, but there is a degree to which such informal recommendations must be unsafe. When I sustained an injury some years ago, I made the conscious choice to go to my GP to make sure that it would be all right to see an osteopath and a chiropractor, because I did not want to put myself in danger of sustaining an even greater injury.
	It is estimated that there are approximately 30 full-time sports medicine physicians in the UK. In answer to a Question put to him by my noble friend on 22 February, the Minister, the noble Lord, Lord Hunt, said that he anticipated that there would be a further 40 specialist doctors in the near future, with a further 12 starting training each year. Those are not enormous numbers, but, now that we are in a new financial year, will the Minister say whether the predictions of the noble Lord, Lord Hunt, were right and have been realised? Where will those new training places be and how will people get access to them?
	I turn briefly to accreditation. I understand that the Intercollegiate Academic Board of Sport and Exercise Medicine has been created by the Academy of Royal Colleges to formalise future training of specialists in sports and exercise medicine. Some consultant posts exist, but they have usually grown out of an existing speciality; for example, orthopaedics or rheumatology, because formal training and formal recognition are not sufficiently widely available. A number of universities offer diploma or MSc courses, but they vary in one crucial aspect: the amount of students' clinical exposure. Is the Minister's department planning a move towards a standard of accreditation for sports medicine which covers a range of disciplines and not just musculoskeletal medicine?
	Like, I suspect, other contributors to this debate, I took a very interesting trip around the internet during my preparation. I dipped into the e-library of the American Orthopaedic Society for Sports Medicine. I use the word "dipped", because it is huge. It covers a wide range of topics, including preventing cycling injuries, health and activity, starting a strength training programme, anterior cruciate ligament injury prevention, how to rehabilitate a sprained ankle, exercise for bone health and shoulder dislocation treatment. I could go through the list of misery that befalls people who are engaged in physical activity. However, I cannot help but think that if the NHS, with the access to all the specialisms that it has, had such a resource and made it available to patients, a great deal of the demand on the NHS would decrease because people would be able to take the right steps in their own self-medication and self-treatment, particularly to avoid that period after an injury, about which my noble friend Lord Addington spoke, when they simply wait around not knowing what to do.
	I hope that the Minister will in her response tackle the question of how we can apply the rich base of multidisciplinary research which exists in the NHS and become world-beaters in sports and exercise medicine. Will she speak particularly about accreditation and provision of preventive services? I again congratulate my noble friend on securing this debate.

Earl Howe: My Lords, the subject of obesity is never far from our thoughts whenever we debate public health issues, and that is entirely appropriate and right for a condition which, perhaps more than any other, has so many adverse long-term implications for the well-being of the nation. However, this evening, the noble Lord, Lord Addington, has brought us into the obesity debate from an angle that is rather different from the usual one. For once, we have the opportunity to look at the "calories out" aspect of the obesity equation as opposed to the more familiar and well worn arguments that surround "calories in". I for one find this very refreshing.
	When it comes to sport and exercise, the Government have said and done a lot that is worthy of approval. Some useful targets have been set. The best known is perhaps the target contained in the public service agreement of 2004 to,
	"halt the year-on-year increase in obesity among children under 11 by 2010, in the context of a broader strategy to tackle obesity in the population as a whole".
	As part of that target, the Government aimed to have three-quarters of all schoolchildren doing at least two hours of school sport a week by 2006—a target which, happily, has been exceeded—and four hours of sport a week by 2010. The emphasis on children's sport is certainly not misplaced. We know that, when it comes to diet and exercise habits, it is much easier to influence the behaviour of the young than it is of adults, and it is among the young that the most alarming rise in obesity has taken place during the past 10 years. It is therefore welcome that, at local level, there are school sports partnerships, which have the aim in particular of increasing the participation of overweight and obese children in physical activity. I have to say that those partnerships have yet to prove their worth. The National Audit Office, the Healthcare Commission and the Audit Commission published a joint report last year, and one of the criticisms in it was that the programmes being rolled out to combat obesity are essentially unproven. There is a serious shortage of evidence about what works for obesity and a serious shortage of baseline data against which to evaluate results. A process of rigorous evaluation is therefore absolutely critical if we are to determine whether resources have been used efficiently and effectively in this area. We know that a social marketing campaign has been commissioned by the Government to try to get closer to what drives people's behaviour as regards eating and exercise. While that is not by any means a silly thing to be doing, one has to say that, for such an important undertaking, it has been started rather late in the day.
	The Government's general message, encouraging us to be more physically active, is of course only partly to do with sport, but it is clear that for young people, assuming all goes to plan, sport is going to be a major ingredient in the mix. That is why the noble Lord, Lord Addington, has focused on sports medicine. If more and more people are being encouraged to take up sport, then it follows that they should be backed up by trained doctors and nurses with appropriate specialist knowledge. That indeed was the context in which the new specialty of sports medicine was established by John Reid two years ago. The other day we heard from the noble Lord, Lord Hunt, that quite soon we will have 40 specialist doctors with another 12 starting training each year. Presumably that rate of admission to the specialty is based on some sort of forecast of likely demand, and it would be interesting to know what set of assumptions underpin the figures in that sense.
	When people talk about sports medicine specialists—and I am thinking now of some of the pronouncements made by the government agency, UK Sport—it is often in the context of elite athletes who are training to Olympic standard. The noble Lord's concern, quite rightly, is not about Olympic athletes so much as about the millions of ordinary men, women and children playing sport. In that context, 40 specialists are a start but they do not sound all that many. In the wake of the recent debacle over MTAS, it would be helpful to know from the Minister how many of those doctors seeking to enter the specialty have been accepted into specialist training posts and how many such posts remain unfilled. But on a wider scale, what we have not seen, as the noble Lord said, is any real encouragement in the regions through the postgraduate deaneries for junior doctors to train in the specialty. I should be interested to know whether the cost of setting up run-through programmes in sports medicine was thought about when the global budget for delivering medical education was originally set.
	The noble Lord, Lord Addington, also spoke about the patchy provision of sports and exercise medicine around the country, to which one could also add the patchy nature of commissioning. Of course the Government are right that PCTs and strategic health authorities are the people best placed to assess local needs and to develop plans to deliver the services that are required to meet them, but how do they really know what services are required? To an extent, we are working in the dark when looking at the demand side of the sports medicine equation, because as far as I have been able to discover, there are no statistics on the number of injuries that are attributable to sport and exercise and treated under the NHS.
	What we do know is that there are not enough employed physiotherapists. The Chartered Society of Physiotherapy has reported that in 2004-05 over 1 million patients admitted to hospital had conditions that required physiotherapy treatment but in many cases had to wait for a long time before that treatment became available. It is highly likely that exactly the same situation obtained during the year just gone. The irony is that there are plenty of physiotherapists out there, but they are unemployed. Seven out of 10 physiotherapists who graduated in 2006 had not found a job by Christmas. The reason, of course, was that trusts did not have the money to take them on. Another 2,500 physiotherapy students are due to graduate this year, and one has to be fearful that the same fate may await them. As a nation we surely cannot afford this waste of resource, but from the patient's perspective the waste of resources is a secondary issue.
	The recent funding difficulties in the NHS have been very damaging. The money that PCTs have been given to promote wellness programmes has been swallowed up by the demands of service provision. The same has happened to the money at SHA level for education and training. On the wider issue of medical education against that backdrop, the universities whose job it is to deliver medical education and training perceive the scene before them as unstable and unpredictable. They have seen that the over-riding priority of SHAs has been to achieve financial balance at the expense of anything and everything else, including education budgets and workforce plans. This is still happening. Some SHAs are continuing to raid their education budgets. Nor do the universities see themselves as being an equal partner in the planning of the future workforce, as by rights they should be. They see themselves being told what to do by the NHS—and, sad to say, they see in SHAs a dearth of the skills needed to deliver what is at the best of times a very complex agenda.
	The engagement of the academic and research community—the mobilisation of universities—is a key part of what it takes to modernise the health service but, at almost every level, this kind of engagement is being hampered. At departmental level, there is not enough formal dialogue between the DfES and the Department of Health. At SHA level, there is no longer a requirement for there to be an academic representative on the board as of right. At provider level there are no direct incentives for trusts to engage in education, training and research. The result is an increasing disconnect between higher education and the health service. If that persists, it would I think be dangerous to assume that the universities will want to put up with it indefinitely: some may well decide that they would be better off devoting their resources to other things. That situation, if it were allowed to happen, would not bode well for the future of medical education generally, or for sports medicine in particular.
	A great many initiatives and a great many organisations are involved in the delivery of the Government's anti-obesity agenda. Expertise in sports medicine, shared among a sufficient number of practitioners, is a small but important part of that agenda. I hope that the Government will make it their business to ensure, by proper performance management, that it is delivered.

Baroness Royall of Blaisdon: My Lords, this has been a very good debate, and I too congratulate the noble Lord, Lord Addington, on his dogged determination. I am grateful for this opportunity to demonstrate our commitment to healthier living, particularly by using all the available opportunities to encourage people to eat more healthily, take more exercise and participate in more sport. Too often we forget that not only is public health everyone's business but it is everyone's responsibility. As individuals and as a society we gain from healthier living. The noble Lord, Lord Addington, is absolutely right: sports and exercise medicine is a preventive medicine and the case for it is a no-brainer.
	Promoting healthy lifestyles is a vital government responsibility, helping people to help themselves. That was the purpose of the White Paper Choosing Health: Making Healthy Choices Easier, published in 2004, which demonstrated our commitment to making healthier choices easier by offering people practical help to adopt healthier lifestyles. We recognise that diet, physical activity and public health are essential elements of addressing health inequalities and other inequalities in our society. Since Choosing Health, the Department of Health has been involved in many initiatives to help people quit smoking, eat more healthily and exercise more. The implementation of our smoke-free legislation from 1 July is a prime example.
	The noble Earl, Lord Howe, mentioned our challenging target for tackling obesity. As my noble friend Lord Giddens pointed out, obesity is a fundamental problem which is common to many countries. It is a complex public health problem responsible for many early deaths. In 2005, approximately one-fifth of adults were classified as obese. We know that unless we act now, within the next three years those figures are set to increase dramatically. The situation for our nation's children is particularly worrying. In 2005, almost 17 per cent of boys and girls aged between two and 10 years were classified as obese. That is a huge increase since 1995 and is something about which we should all be concerned. Obesity is associated with a number of diseases. It causes depression and low self-esteem in many people. About 58 per cent of type 2 diabetes, 21 per cent of heart disease and between 8 and 42 per cent of certain cancers are attributable to excess body fat.
	The costs to our health are huge, but there are also economic costs, and physical inactivity is estimated to cost the economy £10 billion a year. Choosing Health set out a detailed plan of action on physical activity, diet, personalised support and information and curbs on marketing that helped to provide a good foundation for tackling obesity. Since then we have made good progress on food labelling and restrictions on food promotion to children, healthy schools, work on infant feeding and work with Sure Start centres. Our schools are now healthier places. More than 12,000 schools have achieved the healthy school standard, which means that they meet criteria for obesity, physical activity and diet. We understand the importance of supporting parents and helping their children to eat healthily and take more exercise. We are working on a number of campaigns to encourage healthier eating and increase physical activity, such as the recent Top Tips for Top Mums campaign to encourage children to eat more fruit and vegetables. My noble friend Lord Giddens is absolutely right that we have to encourage more women to participate in sport, not only for their own interests but because of their influence as mothers.
	We see the development of sports and exercise medicine as a further strand of our strategy to reduce obesity and promote healthier lifestyles; indeed, it could have a real role in improving health and well-being. Sports and exercise medicine is not just the medical discipline that addresses injuries occurring as a result of sport, but also has an important role in the treatment and prevention of illness. It is yet another way of supporting Choosing Health priorities. Sports and exercise medicine doctors will be key players in encouraging people to safely increase exercise levels and participation in physical activity. They will be well equipped to work in partnership to help develop programmes aimed at tackling obesity and eating healthily. They could also have an important role in reducing cigarette smoking and improving mental health.
	The sports and health medicine curriculum has been specifically developed to include a section on aspects of population health. As part of their training, sports and exercise medicine trainees will undertake public health attachments to develop specific health-promotion skills. This will enable them to promote physical activity both in the workforce and in the general community, to develop and participate in programmes for those most resistant to physical activity and exercise, and to develop and give educational talks to community groups promoting the health benefits of exercise. Naturally, we will expect sports and exercise medicine specialists to work in close partnerships with their public health and primary care colleagues.
	The 2012 Olympics provided a useful catalyst for both the Royal College of Surgeons and the Department of Health, but we recognise that there is a lot more work to be done to develop this field of sports medicine. I, too, think it rather strange that it has taken so long for this specialty to take off. At present only a handful of hospitals have a trained sports and exercise medicine doctor, and many sports and exercise conditions are seen in general practice. However, we are making real progress in developing this specialty. The noble Earl asked whether our figures were based on demand. The Faculty of Sport and Exercise Medicine has estimated that, to fulfil our Olympic promise, there need to be 31 specialists in sports and exercise medicine on the specialist register. However, I emphasise that that is just the start. Noble Lords are absolutely right to say that there need to be a lot more of these people. The Faculty of Sport and Exercise Medicine aspires to have one specialist in each primary care trust. I am sure noble Lords consider that that is not enough, but it is an important part of our aspirations. The faculty has developed a curriculum to ensure a robust training programme, and by September 2006 there were three doctors on the specialist register. I say to the noble Baroness, Lady Barker, that the faculty sets the standards.
	By February 2007 there were eight doctors undertaking specialty training in sports and exercise medicine, and from August 2007 it is expected that there will be at least 16 doctors training in sports and exercise medicine in London alone. There are also training posts in other parts of the country—one in the north-east, possibly two in the east Midlands and two in the Armed Forces. In addition, following a statement by the Secretary of State last week that an additional 200 specialist medical training posts are to be created and funded centrally, it has been decided that the specialty of sports and exercise medicine will be allocated three of these additional new training posts. They are accessed like any other specialist training posts. I am assured that offers for the 16 posts went out this week. We see no difficulty in the posts being filled. If that is not the case, I shall certainly come back to noble Lords.
	The noble Baroness, Lady Barker, referred to 30 to 40 specialist exercise physicians. These physicians are not on the faculty register but would be eligible for top-up training via Article 14. The Faculty of Sport and Exercise Medicine is also keen to support doctors with relevant sports and exercise medicine experience to apply for specialist accreditation via the Article 14 process. These doctors would not be required to participate in the full training programme, but would be eligible for inclusion in the specialist register if they received a short period of top-up training. In that way we shall see a lot more people who have a specialty in sports and exercise medicine. In recognition of this the Department of Health recently allocated some top-up money for training in 2006-07. This money is being used for pump-priming a sports and exercise medicine post in Nottingham and providing two six-month top-up training posts in London.
	The noble Lord, Lord Addington, is absolutely right to say that people need access to sports medicine specialists in the community. That is our aspiration and is exactly what we want. As many noble Lords said, to date only the wealthier members of our society have had access to these people. We want people wherever they are to have access to those who have specialist training.
	We have demonstrated our commitment to strengthening the availability of sports and exercise medicine services throughout the NHS. But this is not just about complying with our Olympic bid. Of course that spurred us into action, but this is also about supporting people as they make their healthy lifestyle choices. It is also a means of improving governance in sports and exercise medicine services and of democratising access so that more and more people have access to those services.
	I am delighted that this evening's short debate has demonstrated that there is strong support for our commitment to strengthening the availability of sports and exercise medicines throughout the NHS as a means of achieving that commitment. There is a lot more to be done but we are committed to doing it so that the whole of our society can partake healthily and safely in physical activity, we decrease the number of obese people, and we have a healthier society.

Lord Davies of Oldham: My Lords, I beg to move that the House do adjourn during pleasure until 8.35 pm.

Moved accordingly, and, on Question, Motion agreed to.
	[The Sitting was suspended from 8.28 to 8.35 pm.]

Pensions Bill

House again in Committee on Clause 5.

Lord Oakeshott of Seagrove Bay: moved Amendment No. 21:
	Clause 5, page 7, line 1, leave out from "means" to end of line 8 and insert "the tax year 2007—2008"

Lord Oakeshott of Seagrove Bay: Amendment No. 21 is in my name and that of my noble friend Lord Kirkwood. I shall also speak to Amendment No. 23. As we are now after the dinner break and have a long list of amendments in front of us, I propose to go into overdrive, if that is all right. The amendments ask for clarity and precision on when the earnings linking, which we all agree is necessary and long overdue, will come into place. Amendment No. 21 asks for it to be brought forward to now or as soon as possible, effectively next year. The other amendment is to make the Government commit themselves that it will not slip beyond 2013. Amendment No. 21 is our preferred option, but we also have Amendment No. 23. We ask the Government to respond as clearly as possible, given that this is the cornerstone of the Bill. We have good support from Help the Aged and from other charities. It is essential that this is brought forward and made clear. I beg to move.

Baroness Turner of Camden: I was very pleased to learn that the Government had accepted in principle at least that the basic state pension should be linked to the wages index, as I think we all were. It will be recalled that Lady Castle, with my support, repeatedly sought to persuade the Government of the necessity to do that, but it was always opposed on the basis that it would mean increases for people who did not really need it. It has been the view of many of us, including the TUC, that the basic state pension should be increased and then linked to the wages index, which would have meant that far fewer people would have to rely on means-tested benefits, which are expensive to administer, often do not reach those who are entitled to them and are regarded as humiliating for many who need to claim them.
	The Bill envisages linking the BSP to the wages index, but not until a date some time in the future. The National Pensioners Convention believes that about 3 million present pensioners may not be alive by then to benefit from it. Baroness Castle would, I am sure, have been pleased at the Government's change of heart about the wages index link, but she would have been less than happy about the delay in its introduction so that many will not benefit. Moreover, it looks as though the Government are intent on providing themselves with a get-out clause if it is not felt to be affordable at that time. That is not satisfactory; it should be introduced as soon as possible after the Bill becomes law.
	If it is claimed that many will benefit who do not need it, the answer is simple; the better off will simply pay more tax. It will be of enormous assistance to many. I hope the Government will see the justice of this. It was originally intended that BSP should be linked to the wages index, but that was changed by subsequent Governments. I understand that, had it been in operation all these years, the BSP would now be worth about £142 a week, enough to lift many out of the need to claim means-tested benefits. Although the pension credit has assisted many pensioners, as we all agree, it has not helped everyone, and I urge the Government to arrange for the wages index link to operate earlier than has hitherto been indicated. I support the amendment.

Lord Skelmersdale: I have an amendment in this group. Perhaps I may ask, like St Thomas Aquinas, "When, dear Lord, when?". That is exactly the point behind—

Baroness Hollis of Heigham: He then said, "But not just yet".

Lord Skelmersdale: Indeed, but it does not suit my case to carry on. The Government's position appears to be rather mixed on this, because they seem to be insisting that the link will partly be paid for by the rise in state pension age and partly by new money, and that the Bill is affordable, with clear funding structures behind it. In the next moment, almost in the next breath, the Government claim that further flexibility is necessary on the timing to ensure that the promise that the Bill makes to pensioners is affordable. For goodness' sake, which is it?

Baroness Greengross: I very much support the amendments of the noble Lords, Lord Oakeshott and Lord Kirkwood, and support what the noble Baroness, Lady Turner, said. I welcome the plan to link the pension with earnings, and noble Lords across the Committee feel strongly about that. I hope that the amendment of the noble Lord, Lord Oakeshott, will be carried. In the event that it is not, can the Minister at least consider those who are 80 and above, because, making them wait until 2013 takes a risk that they will not be here? It would seem cruel to say to them, "It's going to happen, but you will probably not be around to benefit from it". In the event that the Minister feels that he cannot support the much better amendment that has been proposed, will he at least consider the over-80s?

Lord McKenzie of Luton: I thank the noble Lords, Lord Oakeshott, Lord Kirkwood and Lord Skelmersdale, for their amendments and for providing a chance for us to debate the restoration of the earnings link to the basic state pension. The Pensions Commission made it clear that there was no crisis for today's pensioners, but there would be for future pensioners unless reforms were made to address the issues that they faced. We are following the thrust of the Pensions Commission's proposals by developing solutions for the future. Uprating the basic state pension in line with earnings is one of those solutions. I start by confirming the Government's commitments on earnings uprating.
	First, we will continue to uprate the pension credit standard minimum guarantee in line with earnings beyond 2008 and over the long term. At present, there is no legal obligation to do this. This Bill puts that commitment in primary legislation to provide certainty on that point. Secondly, during the next Parliament, we will link the uprating of the basic state pension with average earnings over the long term. Our objective, subject to affordability and the fiscal position, is to do that in 2012, or by the end of the next Parliament at the latest.
	That commitment was set out in the Government's pensions White Paper of May 2006, and Clause 5 legislates for it. We will make an announcement at the beginning of the next Parliament specifying the date for introducing the earnings link for the basic state pension. This group of amendments seeks to bring forward either the date from which the earnings link is restored or when and how that date should be announced.
	The noble Lords, Lord Oakeshott and Lord Kirkwood, tabled an amendment that seeks to bring forward the date for introducing the earnings link for the basic state pension so that earnings uprating takes effect from the tax year 2008-09. Some noble Lords have expressed disappointment that we are not promising to restore the earnings link earlier than 2012, but the costs arising from introducing it earlier are considerable. Introducing the earnings link from 2008-09 would cost an extra £2.2 billion in 2012 alone. Costs would continue to rise over time to about £6.5 billion a year in 2050. Those costs might be affordable if we were restoring the earnings link only in the short term or in isolation from other changes, but not if we want to link pensions with earnings over the long term as part of our wider reforms. Earnings uprating is part of a package of complementary reforms, and trying to unpick the timing of this element of those reforms fundamentally changes that package.
	Many Members of the Committee will know that the Pensions Commission recommended that earnings uprating should be introduced from 2010 or 2011. The noble Lord, Lord Turner, has confirmed that a short delay in the introduction of earnings uprating, to our objective date of 2012, does not undermine the overall direction of our reforms.
	The second amendment of the noble Lord, Lord Oakeshott—Amendment No. 23—seeks to ensure that the latest tax year in which earnings uprating of the basic state pension takes effect begins before 6 April 2013. In other words, the amendment would dictate that earnings uprating had to be in place no later than the tax year beginning April 2012.
	It is important that the Committee is assured of our clear commitment to restore the earnings link. Although we have said that our objective is to uprate the basic state pension by earnings from 2012, it is right that the Government have a degree of flexibility to consider its timing in the light of the prevailing economic circumstances of the time. Committing any Government now to restoring the earnings link in 2012 without any flexibility to take account of the fiscal position at that point in time would not, I suggest, be a sensible proposal.
	The noble Baroness, Lady Greengross, tabled Amendment No. 22, which also seeks to bring forward the date for introducing the earnings link for the basic state pension and industrial death benefit but only for people aged over 80. Earnings uprating for this group would take effect from the tax year 2009-10, which would mean that this group would get a head start over younger pensioners.
	One effect of the amendment—unintended, I feel sure—is that the rate of basic state pension for the cohorts of people who benefited from earnings uprating in this way would always be higher than for those who reached the age of 80 after earnings uprating was introduced. Indeed, this could lead to the existence of a number of different rates, thereby adding complexity to a system which we are attempting to simplify. As I said, I doubt whether that was the intention behind the amendment.
	We will continue to uprate the pension credit standard minimum guarantee in line with earnings beyond 2008 and over the long term. Pension credit already helps well over 1 million people over the age of 80 and they will continue to benefit from this. Much of the additional money which we have given to existing pensioners over the past 10 years has gone to older pensioners—for example, through higher winter fuel payments and free TV licences.
	As I said, earnings uprating is part of a package of complementary reforms, and trying to unpick the timing of this element, even for older pensioners alone, changes that package. The costs arising from earlier introduction, even for people over 80, are not inconsiderable. In the first year alone, it would add some £100 million to state pension costs and by 2012 that would grow to around £400 million.
	I reiterate that the Pensions Commission made it clear that there is no crisis for today's pensioners but there would be for future pensioners unless reforms were made to address the issues that they face. We are following the thrust of the Pensions Commission's proposals by developing solutions for the future. Our reforms will go further, locking in the gains already made against pensioner poverty and providing a more generous state foundation on which to save.
	As I have already confirmed, we have said that we will make an announcement at the beginning of the next Parliament specifying the date for introducing the earnings link for the basic state pension, and that is reflected in the Bill. The final amendment in this group—Amendment No. 24, tabled by the noble Lord, Lord Skelmersdale—concerns the timing and manner of that announcement. The amendment seeks to specify, more precisely than in the Bill, when the Government will make an announcement on the commencement of earnings uprating. In effect, it commits the Government to making such an announcement within the first six months of the beginning of the next Parliament and to do so by an oral Statement to Parliament.
	Clause 5 not only guarantees that earnings uprating will happen in the next Parliament but also commits the Secretary of State to make an order before 1 April 2011 identifying the designated tax year—that is, the first year in which a review with regard to earnings will take place. This announcement could be made within the first six months of the start of the next Parliament or earlier, or by oral Statement under current arrangements. I do not believe that we have to stipulate that in legislation.
	Our policy for introducing earnings uprating of the basic state pension is absolutely clear. Clause 5 of the Bill provides certainty by legislating for the commitment we have given, guaranteeing that earnings uprating will happen in the next Parliament. Earnings uprating forms the majority of the costs arising from our state pension reforms. Although we have made clear when we intend to restore the earnings link for the basic state pension, the timing for this has rightly been framed with regard to affordability and sustainability of the overall package of reforms over the long term. That flexibility is essential if the package is to stay within the envelope of affordability. The Bill already provides certainty on the Government's commitment to introduce earnings uprating in the next Parliament, and in an affordable way, by guaranteeing this in legislation. For those reasons, I urge noble Lords to withdraw these amendments.

Lord Skelmersdale: I am confused. I shall read Hansard extremely carefully to see what the Minister has said, but I understood him to say that 2012 would be the date; then he said that 2012 is the intention; and then he said we must have flexibility. To leave such a large window of time is totally unacceptable. Primary legislation should be enacted, not put on the shelf somewhere until the Secretary of State judges that the time is right to make some positive headlines. The Government, having made this brave decision, owe it to pensioners to tell them in a reasonable time when it will happen.

Lord McKenzie of Luton: We intend to tell people in a reasonable time when it will happen. We have made a commitment to make an announcement early in the next Parliament. There is a commitment to lay an order before 1 April 2011. As I made clear, our objective is to do it by 2012, subject to affordability and the fiscal position. There is bound to be a need for a degree of flexibility. Notwithstanding that, a clear commitment that it will happen by the end of the next Parliament at the latest is enshrined in legislation. It seems to me that that is very clear and binds the Government within fairly tight parameters.

Lord Skelmersdale: That could be eight years.

Baroness Turner of Camden: The Minister mentioned a very large figure, saying it would cost several million—£2 billion. Are there any costs to offset against that? Surely there could be some savings. First, a number of better-off pensioners would pay more tax and, secondly, there would be less expenditure on means-tested benefits which otherwise would be payable but which people would not need to claim because they were receiving increased pensions.

Lord McKenzie of Luton: My noble friend is correct. I believe that figure is a net figure. If it is not, I shall certainly write to my noble friend and ensure that she has the net figure.

Lord Oakeshott of Seagrove Bay: The more I listen to the debate, the more I realise that a period in a Parliament is a nonsense. Why should pensioners have to wait longer if it happens to suit Gordon Brown to run right up to 2010 rather than call an election next year? It seems to me that, in principle, there should be a date. I feel like offering the Minister a deal; that we will drop all our suggestions of raising the basic state pension and that we shall even drop our support for citizens' pensions if he will promise that the basic state pension is put up by £1 a week every time the word "flexibility" is used in our debates.
	More seriously, I thank the noble Baronesses, Lady Turner and Lady Greengross, for their support—I could call them the usual suspects. The point is well made by Age Concern and Help the Aged that without the restoration of the link with earnings, the real value of the basic state pension in today's earnings terms will fall to £79 by 2012. Pensioners are seeing the value of their pensions decrease steadily in relation to average earnings. They have waited long enough. At this stage, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.
	[Amendments Nos. 22 to 24 not moved.]
	Clause 5 agreed to.
	[Amendment No. 25 not moved.]
	Clause 6 agreed to.
	Clause 7 [Removal of link between lower earnings limit and basic pension]:

Lord McKenzie of Luton: moved Amendment No. 26:
	Clause 7, page 8, line 35, leave out "This section has" and insert "Subsections (2) and (3) have"

Lord McKenzie of Luton: I shall speak also to Amendments Nos. 27, 28 and 29. These amendments make changes to Clauses 7 and 8 as a result of recommendations made by the Delegated Powers and Regulatory Reform Committee in its ninth report. Clauses 7 and 8 deal with the removal of the link between the lower earnings limit and the rate of the basic state pension. Because of that link, the level of the lower earnings limit currently increases in line with prices. However, the link means that without the changes made by Clauses 7 and 8, the lower earnings limit would increase in line with earnings once the earnings link is restored because it is connected to the rate of the basic state pension through legislation.
	Our view is that the lower earnings limit should not automatically increase in line with earnings simply as an unintended consequence of restoring the link between earnings and the basic state pension. Therefore, Clause 7 amends the existing delegated power contained in Section 5 of the Social Security Contributions and Benefits Act 1992 so that where regulations prescribe the level of the lower earnings limit, the level will no longer be linked to the weekly rate of the basic state pension. Clause 8 amends corresponding provisions in the Social Security Contributions and Benefits (Northern Ireland) Act 1992, as national insurance falls to be legislated for in respect of the whole of the UK.
	We believe that the provisions that govern the setting of the lower earnings limit should allow for flexibility, which is what Clauses 7 and 8 achieve by providing the Treasury with the discretion to set the amount of the lower earnings limit. The Treasury will separately consider the appropriate uprating of the lower earnings limit once the link with the basic state pension is broken.
	However, the Delegated Powers and Regulatory Reform Committee, in its ninth report, highlighted the significance of the lower earnings limit as the entry point to contributory benefit entitlement. In light of that, it considered that once the link between the lower earnings limit and the rate of the basic state pension is broken, regulations that set the rate of the lower earnings limit should no longer be subject to the negative procedure, but rather to the affirmative procedure. It also recommended a parallel change in Clause 8 which makes provision for Northern Ireland. I am pleased to say that we unreservedly accept the committee's recommendations. We therefore tabled Amendments Nos. 27 and 29, which ensure that those recommendations are fulfilled. A couple of small tidying up amendments—Amendments Nos. 26 and 28—are necessary as a result. I beg to move.

Lord Skelmersdale: Having been rather intemperate on my last intervention—unnaturally intemperate, I hope—I congratulate the Government on acceding to the suggestions of the Delegated Powers and Regulatory Reform committee. I have no complaint about the rationale behind Clauses 7 and 8, and I agree with the committee and the Government that the regulations should be by affirmative instrument, not by negative resolution.

Lord Oakeshott of Seagrove Bay: We on these Benches agree. We congratulate the Government and we also congratulate the Regulatory Reform Committee, under the chairmanship of one of my predecessors in this job, my noble friend Lord Goodhart, on doing its job well and keeping the Government honest.

On Question, amendment agreed to.

Lord McKenzie of Luton: moved Amendment No. 27:
	Clause 7, page 8, line 36, at end insert—
	"( ) In section 176(1) of the SSCBA (instruments subject to affirmative procedure), before paragraph (a) insert—
	"(za) regulations under section 5 specifying the lower earnings limit for the tax year following the designated tax year (see section 5(4) of the Pensions Act 2007) or any subsequent tax year;"."
	On Question, amendment agreed to.
	Clause 7, as amended, agreed to.
	Clause 8 [Removal of link between lower earnings limit and basic pension: Northern Ireland]:

Lord McKenzie of Luton: moved Amendments Nos. 28 and 29:
	Clause 8, page 9, line 3, leave out "This section has" and insert "Subsections (2) and (3) have"
	Clause 8, page 9, line 4, at end insert—
	"( ) In section 172 of the Social Security Contributions and Benefits (Northern Ireland) Act 1992 (Assembly, etc. control of regulations and orders)—
	(a) in subsection (9) for "(11), (11A) and" substitute "(11) to"; and(b) after subsection (11) insert—"(11ZA) A statutory instrument containing (whether alone or with other provisions) regulations under section 5 specifying the lower earnings limit for—(a) the tax year following the designated tax year (see section 5(4) of the Pensions Act 2007), or(b) any subsequent tax year,shall not be made unless a draft of the instrument has been laid before and approved by resolution of each House of Parliament.""
	On Question, amendments agreed to.
	Clause 8, as amended, agreed to.
	Clauses 9 to 11 agreed to.
	Schedule 2 agreed to.
	Clause 12 agreed to.
	Clause 13 [Increase in pensionable age for men and women]:

Baroness Turner of Camden: moved Amendment No. 30:
	Clause 13, page 14, line 25, at end insert—
	"( ) Following the period in subsection (1), the Secretary of State may by order vary the pensionable age for men and women in specific employments."

Baroness Turner of Camden: At Second Reading, I referred to the provisions in the Bill relating to the age of retirement. It is understandable that the Government should seek to deal with the projection that we are all likely to live very much longer. Therefore, pension provision on the present basis needs to be revised—the pension provision has of course to last that much longer. On the other hand, to increase the age at which retirement takes place for everyone is wrong.
	The TUC has already expressed concerns about that. I notice that it was raised in debate in the other place by MPs concerned about constituents working in physically demanding jobs. I referred to people working in the construction industry. MPs referred to employees in the fishing industry, again, a sometimes dangerous and physically demanding job where fitness may mean safety and where its absence could lead to danger and even death, not just to the employee concerned but to the others working with him. I hesitate to think of individuals in their mid-sixties working on scaffolding.
	I am aware that my amendment is not particularly well crafted, but I wanted to have some wording in the Bill which would enable exceptions to be made in certain industries. This relates not only to male employment, as many physically demanding jobs are undertaken by women which are much better done by those who are younger and more fit to do them—nursing disabled or elderly people is an occupation that comes to mind. I hope therefore that the Government will consider seriously what I am saying and perhaps will bring back another form of wording on this issue if mine is felt to be unsuitable. I beg to move.

Baroness Dean of Thornton-le-Fylde: I support the amendment of my noble friend Lady Turner. I support fully the proposal to raise the retirement age. The period over which it will take place is very fair: it will not be a shock to anyone.
	The more I have looked at this issue, the more I have reached the view that it would not be an equitable way forward to make it mandatory for people working in some of the occupations that we know involve heavy lifting, are dangerous and have high accident rates to wait until the age of 68. People in such occupations are generally those who were not in education until their early 20s, but who probably left school at 16. So you are talking about 52 years of continual week-in, week-out work in heavy industry which in many instances has a high accident rate.
	I greatly welcome the amendment and I hope that the Minister will consider it seriously. I know that it is difficult and that we do not have exceptions at the moment, but the provision is not mandatory. It says that,
	"the Secretary of State may by order vary the pensionable age for men and women in specific employments".
	Clearly those specific employments would have to be considered and proven. Otherwise, we would have all kinds of exceptions under the legislation. Against the background in which we saw the retirement age for women rise from 60 to 65, a Bill that raises it from 65 to 68 in our own lifetimes needs to be considered. I would hope that the Minister will give the amendment serious consideration. If it is unacceptable, I should like to know why. Fifty-two years is really more like being chained to a life of hard work which I do not think any of us would envy.

Lord Skelmersdale: I agree with the noble Baronesses that there will be many people working in particularly arduous or dangerous jobs who find themselves physically or mentally unable to continue until the state pension age, be it 65 as it is now or 68 as it will become. However, I do not believe that they are best served by writing them off as not fit for useful employment, at an age when their peers continue to engage fully in the workplace, not least because I noticed no dissent from either noble Baroness when we discussed the Welfare Reform Act as recently as this Session. The whole point of that legislation is to encourage people whose disability does not allow them to continue in their current employment to seek, if not to secure, alternative employment. Instead of putting these people on the employment scrapheap, I would like to see more opportunities for these and other older workers to transfer to other careers. Indeed, I tabled Amendment No. 34 to cover the point—an amendment that, given this discussion, I do not intend to move.
	It will be rare in the future that any person will stay in one job for the whole of their lives. Men and women who wish to leave a physically difficult job still have a great deal to offer society, and should be encouraged to explore other skills that they may have before being forced to retire. As a result, I am afraid that I cannot support the amendment.

Baroness Hollis of Heigham: I apologise for springing this on the Minister, but I draw his attention to the table in paragraph 289 on page 49 of the regulatory impact assessment; I bet he has it with him. I am sorry; I should have given him notice of this. The table confirms the point that my noble friends Lady Dean and Lady Turner are making. Interestingly, it may foreshadow some of our discussion on Amendment No. 81 in the name of the noble Baroness, Lady Howe, in that it gives figures for longevity. We know from the Turner report and since Black and the discussion about health inequalities that everyone's life expectancy has improved. Turner showed that longevity is increasing on average by about one year for every five years, compared with one year for every 10 years; so the speed at which longevity is improving is increasing. In particular, the gap between men and women is narrowing as a result. As I say, that may relate to the debate on new sex-based annuities.
	Turner developed the Black figures on health inequalities to show—this is confirmed in the regulatory impact assessment—that the growth in longevity is uneven and that, for the poorest social classes—social classes 4 and 5—longevity has improved much less in the past 20 years than it has for social classes 1, 2 and 3. In other words, although everyone is living longer, the better off are living much longer, so inequalities are widening for the poorest. There is no tidy overlap between a construction worker or a fisherman in social classes 4 and 5, but I remember from my days in local government that refuse collectors who retired at 65 were not expected still to be with us two years later. There is obviously an interlocking between longevity and lifestyle, smoking and all the rest of it, but it is clear that health inequalities are continuing to widen according to social class, and occupation is to some extent a proxy for that. There is therefore real substance behind this. Gender inequalities are narrowing, which takes us back to the new sex-based annuities, but health inequalities are widening according to social class. That is the point that the amendment in the names of my noble friends is addressing.
	I have been trying to locate the quotation but cannot find it. I have had too much paper, I suppose. I do not know whether it is in the regulatory impact assessment or in the latest 25-page amendment to that assessment from the Minister for Pensions Reform, which was very helpful. It says somewhere that no decision has been made, nor will be made until, say, the 2020s, on what age at which one can draw a pension credit guarantee. In other words, although the state pension age is deemed to be rising—I do not disagree with that at all; that is how we make pensions affordable, given longevity—there is a commitment to reviewing whether the pension credit guarantee should rise at the same time and in the same way. If that is right—perhaps my noble friend could write to me because I am probably catching him on the hop on this—it would put in an underpin for those people whose health is impaired from, say, heavy industry and so on. As much as we would like, people cannot necessarily at the age of 63 or 64 be retrained from being a building worker, and they may have a fairly low functional literacy still. That may be the sort of safety net which would allow people to retire earlier on an adequate income than others.
	Perhaps my noble friend will help me, first, on the widening of health inequalities and the implications that that would have on my noble friend's amendment and, secondly—if my noble friend has it to hand that would be terrific but, if not, he could write to us or tell us at a later stage—the implications for the separation of eligibility age for pension credit guarantee from that of the basic state pension. That may be a way forward.

Lord Oakeshott of Seagrove Bay: The noble Baroness, Lady Hollis, is right that longevity has increased faster among the best-off in our society. None the less, longevity has improved substantially among all classes in all areas over the past 20 or 30 years, so it is reasonable overall that the pension age should go up. I do not believe that the right way to deal with widening inequalities in our society is to fiddle about with differential pension retirement ages. The right way to do it is by effective tax and economic and social policies to help poorer people and to narrow the inequalities. I am sorry to have to say to the noble Baronesses, Lady Turner and Lady Dean, with whom I agree on many things, that in practice there could not be a differential retirement age for people in just the building trade. Obviously, there would be all sorts of people not doing manual jobs, so it would have to be for bricklayers and not for others. I am afraid that the problems of inequality and longevity in our society need to be addressed at the core, not by fiddling around with pension retirement ages.

Lord Fowler: I am deeply disappointed because I was going to compliment my noble friend Lord Skelmersdale on the wisdom of and his skill in putting down Amendment No. 34, and he tells me that he is not going to move it.

Baroness Hollis of Heigham: Do not let that stop you.

Lord Fowler: It will not stop me, as the noble Baroness says. My noble friend is correct. One can relate Amendment No. 34 to the amendment proposed by the noble Baroness. For very much the same reasons that the noble Lord, Lord Oakeshott, has put forward, I do not support it because it would be wrong to vary the age of retirement. I am in favour of increasing the retirement age. In an ideal world, I would like a flexible age of retirement between 60 and 70, which is exactly what I proposed 20 years ago. It would be extraordinarily difficult to vary the age of retirement. Rather than having an inflexible league table of professions and jobs, it would be much better to concentrate on providing opportunities for older workers. That is the challenge, which I am not sure the Government or any of the commentators have yet taken on board.
	If we are to have a retirement age of 68, there has to be assurance and reasonable hope that people will have the opportunity of sensible work at that age. One does not want people retiring at 60 and having a twilight of eight years working in jobs which are second-rate as far as they are concerned. That is the challenge for the Government. I am not sure that the implications of that challenge have yet been addressed or worked out.
	We have to provide opportunities. When one looks at public appointments, I wonder how many public appointments are made of people over the age of 65. How many appointments are made in the Department for Work and Pensions of those over the age of 65? I suspect that it is not many. If there is to be a revolution in the increase of pension age, we must think constructively about the issues.
	I think we are mad in this country. Of course it is easy for me to say, but we put far too high a premium on younger people and not enough on experience. Not all experience counts—the noble Lord, Lord Oakeshott, has a lot of experience but you would not appoint him to anything—but in many cases it does count. If I am to be serious, this issue has to be addressed. The Government have to look at the work opportunities available to older people and come up with constructive ways forward, not only in training but also in opportunities to work. Unless we do that, we will not meet the challenge set out by the noble Baroness in her amendment.

Baroness Greengross: I agree with much of what has been said by the noble Lord, Lord Fowler. For those who may not have studied his work, Professor Sir Michael Marmot has done a huge amount of work on the socio-economic determinants of health and longevity. It is the case that huge differences are seen depending on the type of job someone has. Further, longevity is reflected in people's status and the amount of autonomy they have in their work. We have a long way to go in this country because we do not retrain or reskill people after a certain age. Across Europe, if one talks about lifelong learning, it usually means up to the age of about 30 and not beyond. We have to change our attitudes if a lot of what we are talking about this evening is to mean lifelong work, and older people being retrained and in work.
	Regardless of the work they do, we can make changes in the workplace by giving people increased responsibilities and a higher status. Even a menial job can enjoy different levels of status so that people have the ambition to achieve. That makes such a difference to longevity and health and is something we need to pursue. I hope that, as a country, we can do this.

Baroness Howe of Idlicote: I am sure we will return to this issue when we reach my amendment on annuities. Having said that, this amendment raises some interesting questions. As we have heard, those lucky enough to be born into the higher socio-economic groups or to have been to university enjoy measurable advantages, but we forget at our peril that the European Union has just passed an age discrimination law which we have adopted in this country. That should prompt us to consider exactly what restrictions, if any, should be placed on some professions. Of course one needs to be jolly careful that those who want to stay in dangerous jobs, quite apart from those who have reached a certain age, are capable of doing so. That is an important test. But that aside, not to allow the individual to have any choice is worrying and antithetical to the ideas being put forward, not least to the European age discrimination legislation.
	The issue of training is important. If there is to be a pension credit guarantee, the noble Baroness, Lady Hollis, said that no one should miss out on their proper pension by having to retire early, no matter what is decided about the final retirement age. Having said that, there can be danger in certain jobs. For instance, if you were a surgeon and developed a shake in your hand it might be desirable that you did not operate any more. In such circumstances, presumably you would rely on your peers in the group to give you advice. Perhaps it ought to be built into the scheme that after a certain age a review should take place every two years or so. But I would hate to see the individual's choice in these matters completely removed just because they were in a specific job.
	We all know that we age differently, both physically and mentally, and perhaps we have not quite thought this through. But the one thing we want to be certain about is that the Bill will not disadvantage either males or females in this respect as long as they want to work. Certainly there should be plenty of retraining available. Older people can bring a great deal of wisdom to debates. Often they have knowledge of what went on in the past which the younger generation have forgotten, even if they were ever taught it. Even if it has not yet become history, it can stop you going down paths which have been trodden often and found not to work.
	I am ambivalent about the amendment, but I would not want to see anything too rigid put in place.

Baroness Morgan of Drefelin: I thank my noble friends Lady Turner and Lady Dean for precipitating the debate. They have set us a challenge. The issues that have come out during the passage of the Bill are extremely important. Your Lordships' House is hugely symbolic of the value of older people and the contribution they have to make to society. We are all very much walking the walk.
	I particularly emphasise the importance of the debate around health inequalities. We do not know exactly how health inequalities will precipitate changes in life expectancy in the future, particularly when having regard to childhood obesity and the effect of exercise, so it is extremely important that we have these discussions.
	Before I address the specific point with which the amendment is concerned, I should like to say a few words to remind the Committee why Clause 13 and Schedule 3 are essential to the Bill. It is common ground that, in common with many industrialised countries, we have seen dramatic increases in longevity during the past half century and a declining birth rate. Even though the rate of mortality improvement is expected to slow down somewhat in the coming decades, none the less the projections all point to further gains in life expectancy. We are not proposing to erode the gains that have already been made; rather, we are proposing simply to check the ever increasing length of time people can draw their state pension for, by increasing the state pension age broadly in line with the projected increases in average life expectancy.
	These improvements in longevity have not been confined to those in non-manual occupations. The ONS longitudinal study indicates that the average life expectancy for a male manual worker who reaches 65 increased by more than two years over two decades ending in 2001, up from 12.3 years in 1977 to 1981 to 14.7 years in 1997 to 2001. At the same time, the proportion of male manual workers who are projected to survive to 65 is also improving, up from 71 per cent for those born in 1981 to 80 per cent for those born in 2001. That indicates that on the basis of past trends, the proposed increase in the state pension age should not result in a decline in either the proportion of those surviving to the new state pension age or in the number of years spent in receipt of state pensions. The proposed increases in the state pension age are an indispensable part of the pension reform package, because they are needed to ensure that the pension settlement will remain affordable in the long term—or, to put it another way, they ensure that the extra costs associated with a more generous state pension will be shared fairly between the generations.
	At the heart of my noble friend's proposal in her amendment is the proposition that increasing the state pension age will disadvantage those who are unable to continue in physically demanding work beyond a certain age. At Second Reading she spoke about the important issue of ageing workers and heavy industry, as she has done again today. She also made the valid point, using the scaffolding industry as an example, that we should not just be concerned about the specific employee but also about the effect of others working with him or her. I am entirely in agreement with her that people undertaking that kind of work should not be forced to continue in it beyond the limits of their physical capability. I also accept the point that many people leave such employment before the current state age.
	Where I am afraid I must take issue with my noble friend, however, is her conclusion that the solution must be to provide different state pension ages according to the type of employment, although I fully support her motives behind bringing the amendment forward and having this debate. Others around the Chamber have pointed to a number of practical difficulties with her proposal, not least in determining how long a person needed to be employed in a designated occupation to qualify and establishing over a person's lifetime what periods of qualifying employment they had been engaged in. Added to that, I am sure there would be much more debate and argument over which specific employments would have a different state pension age and which would not. For example, who is to say that a construction worker working in a hard physical job should be considered different from someone who is not doing a physical job but none the less one that is very stressful? Decisions on these issues could have a perverse effect on people's career choices, potentially incentivising them to remain in physically demanding jobs for longer than might be appropriate for them.
	As we know, the state pension was founded as a universal scheme. Successive Governments over the years have sought to build on it—and, dare I say, improve it—but we have not deviated from the idea of a common minimum age at which men and women may start to draw it. By 2020 that minimum age will be 65 for both sexes. As I have already said, our proposals for increasing the state pension age from 2024 are in line with projected increases in life expectancy. Thus, by the time we get to the first such increase, there will already have been further gains. It is fair to argue that a man of 66 in 2026 will be in the same position as, if not a better one than, a man of 65 today. I submit again, therefore, that we are not making the present position any worse with these proposals.
	No one is suggesting that people in their 60s should have to continue in heavy, demanding jobs. However, the issues around ageing workers and whether they are able to continue in the same employment throughout their working lives need to be addressed—a challenge indeed—by overcoming the barriers that older workers face when they seek to enter employment or refrain and learn new skills. That is something we are hugely committed to as a Government, and we are already starting work on it. For example, our Age Positive initiative encourages and engages with employers over issues of age diversity and a mixed-age workforce, and Jobcentre Plus provides tailored support for older workers through the New Deal 50 Plus.
	I am convinced that it would be of enormous benefit for us to invest more time in debating this issue, and I would value the opportunity to go on. We take it extremely seriously. As the noble Lord, Lord Fowler, said, it is a challenge, and the Government have committed to making significant increases in the number of older people who are working and gaining access to new skills as they get older. This is an issue not just for the DWP but across the whole Government.

Lord Fowler: I am sorry to intervene, but the point that I was trying to make was about government example. The latest figures appear to show that in April 2005, of the people employed in the Civil Service—in government departments and agencies—only 585 were aged 65 or over. That is about 0.1 per cent of the total. Do I take it that the Government intend to improve on those figures? If so, how do they intend to do it?

Baroness Morgan of Drefelin: I do not have the most up-to-date figures, but I assert that the Government intend to improve the number of older people in employment. The noble Lord asked about the department's position on public appointments. The DWP has abolished its bar on those over 65 taking public appointments.

Lord Fowler: When was that?

Baroness Morgan of Drefelin: I do not know, but I can check. This is an extremely serious matter, which we do not take lightly. It is vital that the Government offer a role model for employers. The debate that my noble friends Lady Turner and Lady Dean have precipitated draws attention to the wider issue of how to encourage people in a changing working environment to have the opportunity of not just one career but a number. We make it possible for older people to access skills and training; we have a flexible working environment where they can make the most of their skills and experience to benefit themselves as well as the economy.

Baroness Turner of Camden: I thank my noble friend for that sympathetic response. There was an acceptance of the view that people working on physically exhausting, sometimes dangerous, work should not be expected to continue to work to a late age without some relief or provision made for them. There is a general acceptance from everybody that something should be done about the situation. I thank the noble Lord, Lord Fowler, who also made that point.
	I also thank my noble friends who participated in the debate, particularly my noble friend Lady Hollis, who drew attention to the report on longevity. She simply confirmed what the TUC said in its briefing to me when it argued that,
	"differences in life expectancy mean that an across-the-board increase in the pension age would affect the poor the most".
	We are talking about the poor; manual employment is not always poor employment or physically exhausting. The statistics that have been cited about manual employees and longevity are understandable. We are talking not about all manual employment, simply that which is exhausting and possibly dangerous.
	I am very grateful for the assurances that have been given this evening. I accepted, when I moved the amendment, that its wording was not particularly good. I crafted it so that we could have a debate; I certainly was not wedded to the wording and hoped that if the idea behind it was accepted by Ministers, they might come back with their own. Instead I have had assurances that are acceptable and on that basis, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.
	Clause 13 agreed to.

Baroness Thomas of Winchester: moved Amendment No. 31:
	After Clause 13, insert the following new Clause—
	"Lower earnings limit
	Lower earnings limit
	(1) Section 5 of the SSCBA (earnings limits) is amended as follows.
	(2) After subsection (2) insert—
	"(2A) A person's gross earnings from all sources shall be aggregated when determining whether an individual is above the lower earnings limit.""

Baroness Thomas of Winchester: This is a deceptively simple amendment which addresses a heartfelt issue about which several noble Lords spoke at Second Reading, particularly and most graphically the noble Baroness, Lady Hollis. Many people, mostly women, simply do not begin to get close to any pension entitlement because they have multiple, low-paid jobs which keep them below the lower earnings limit and are thus not entitled to the basic state pension. Individuals accrue a national insurance record from paid employment only if their earnings are above the LEL, currently £84 per week, from one source of employment. The rule about national insurance contributions and earnings over the primary threshold, which is £97 per week, seems completely incomprehensible, so I shall not attempt to go into it.
	The amendment would allow a person's gross earnings from all sources to be aggregated to bring the weekly amount up to or over the lower earnings limit, so that pension entitlement could be accrued. As I said when speaking to an earlier amendment, the Minister will probably say that the reduction in qualifying years to 30 is enough to address this issue, as most women will be expected to have a full-time job or an entitlement to carer's credits for much of their working lives. There is no doubt that the reduction in qualifying years is of great help to women with this pattern of employment, but it is not enough on its own, as we have heard in relation to other amendments. There will still be many thousands of women who fall through this net—the estimate is up to 15,000—and the Bill provides a golden opportunity to address the way in which people really lead their lives, rather than the tidy way in which government would like them to lead them.
	The Minister may cite also the complexities for employers of aggregating a person's earnings from more than one source, but we surely cannot just sit back and wring our hands, allowing inertia to set in, when we know that a significant number of women, and possibly up to 5,000 men, will not be touched by this radical overhaul of pension legislation.
	The Equal Opportunities Commission points out that the administrative complexities in the aggregation of earnings cited by the Pensions Commission apply only to capturing the employers' contributions. The EOC suggests that NICs could be collected just from employees. After all, this is surely compatible with the Government's aim of giving people every chance to build up their state pension rights. The Minister in another place promised more research on this matter. I look forward to the Minister's response. I beg to move.

Lord Skelmersdale: It is a wonderful idea, but just how is it going to be achieved? Who will do the aggregation? Who will be responsible for paying?
	People in the situation which the noble Baroness described have the opportunity to pay voluntary, class 3 NICs, which may well be suitable for them, but even if they chose not to make voluntary contributions, they would not often find themselves missing out on a full state pension. Now that the Government have lowered the NICs requirement to only 30 years, and have extended NI credits, a person would by my calculation have to hold down two part-time jobs for in the region of 20 years, while never bringing up a child or undertaking significant caring responsibilities, not to qualify for a full pension. I do not know whether the Minister will agree with my mathematics, but I shall be very interested to find out.

Baroness Hollis of Heigham: I support the amendment. There is a problem. The Government have recognised that at least 15,000 women, on their calculations, will remain outside the contributory system because their hours of work are fragmented between different jobs. They might at one time run together several part-time jobs—in a newsagent, a pub and a drycleaner's shop, for instance, or in a cleaning job or as a cinema usherette—and no single job takes them above the 16 hours even though their total week may be 40 hours or more.
	Equally—this example is again from the West Norfolk Carer's project—a woman may undertake a multiplicity of jobs in a rural area that never register on the state pension radar. The example given from the network is of a real life woman who had a cleaning job in coastal holiday cottages in the summer, followed by three months in the local agricultural research industry from late August at a basic rate, a stint in the mushroom factory and perhaps a few weeks picking fruit or berries with gangmasters or working on a conveyor belt in a canning factory in King's Lynn or the Fens. The real life woman in the example still ended up with total earnings that did not count as a qualifying year for a basic state pension. I may sound like a worn-out gramophone record, but Amendment No. 4 would help to address this issue, because it would allow people to know whether they had gaps so that they could make them good.
	The noble Lord, Lord Skelmersdale, says that he does not know how this can be done, but it is actually done now. I am sure that he is aware of this. If you are a lone parent, you seek tax credits and you have a multiplicity of jobs that together take you over the 16 hours, you can add them together and get your tax credits. You can already do that for a high-value addition. You can run jobs together if you seek tax credits as a lone parent to get you over the 16-hour hurdle. By going into a tax credit at 16 hours, you get an entitlement to a national insurance credit for the basic state pension. That is the rule now—so it can be done and is done.
	The way forward may be the one suggested by the noble Baroness, Lady Thomas. I understand that there is a problem with divvying up national insurance between three or four employers at any one point in time. Of course, they would not want to do that, but the answer is surely to make it a credit and allow the employee to pay the contribution. That could be done under Amendment No. 4, if necessary.
	I hope that the Government take this amendment seriously. I do not like it that we have itsy-bitsy amendments spread over this and that group, but we are having to do it because there is not enough flexibility in the system. Despite the hopeful response of the noble Lord, Lord Skelmersdale, the Government recognise that under their own estimates 15,000 women are likely to fall outside the system as well as perhaps 5,000 men—we do not know. We need to respond to their needs and one way to do that, if we do not go for the flexible method of allowing people to buy additional years at the end of a working life, is to go for an amendment such as this amendment. It is not the one that I would prefer, but if the Government will not move on mine perhaps we can encourage them to consider this other amendment.

Baroness Howe of Idlicote: I, too, support the amendment. The Minister may tell us that everything is already covered but it sounds from what the noble Baroness, Lady Hollis, has said that unless we insert something like Amendment No. 4 into the Bill there will be loopholes.
	The Equal Opportunities Commission briefing says—as we would recognise from our experience—that something like 15,000 women and 5,000 men are likely to be in this dual situation. Therefore, yet again we see the unequal lives that women lead compared to men, with regard to caring and dependency ratios.
	I would welcome the knowledge that this amendment is unnecessary, these matters are already catered for and none of these women will miss out, but at the moment the low earnings limit puts them at a disadvantage. I look forward to the Minister's response.

Lord Kirkwood of Kirkhope: I add my support to the amendment. I do not think that 15,000 women and 5,000 men is a big number to handle in the totality of the complex administration that we run at the moment, so any suggestion that there is a technical block to doing this is nonsense. However, portfolio ways of existence are likely to increase as our economy is increasingly being hollowed out in the middle. People who are not in a high-skilled organisation where they are likely to get training and other employment support, and particularly those coming out of welfare into work, often have to go through a period of portfolio employment to get that experience and training. It is actually not a bad thing and might be encouraged in some circumstances to get people out of the habit of benefit dependency.
	The portfolio type of existence in the labour market will probably become more prevalent and we should take that into account. I do not think that the Government can with any justification say that it is too complicated to do that. I agree with the noble Baroness that the way of getting round the question of who should pay the employee's contribution is to use a credit and let the employee pay the contribution, if that is the way to get them into the contributory system. I think that that would be beneficial to everyone. There is more to the amendment than can be dismissed simply by saying that it is too complicated or too technical.

Lord McKenzie of Luton: I thank the noble Baroness, Lady Thomas, for giving us the chance to go over an old conundrum. I think that most speakers have anticipated the government response on this, particularly the noble Lord, Lord Skelmersdale, whose analysis I agreed with. This is about the aggregation of low earnings from multiple part-time jobs so that people earning below the lower earnings limit in each job can accrue state pension if their total earnings are above that level.
	The Pensions Commission and the Government have both considered this, which in practice is an issue that largely impacts on women. There is no lack of will on the Government's part to address the problem of unequal pension outcomes for women with our pension reforms. Many of the state pension measures in the Bill have been driven largely by the Government's commitment to reshape state pensions for women, giving fairer outcomes especially for women who combine paid work with family and caring responsibilities.
	On this issue, I believe that there are other solutions, both now and post reform, and the noble Baroness anticipated them. The new 30-year single contribution condition and credits for carers will by themselves change the face of the state pension landscape. The reforms in the Bill are a complete package to benefit people with broken national insurance records, including those who have spent a period with earnings below the lower earnings limit. Clearly there are times when some people, particularly women, combine two jobs, both below the lower earnings limit. However, that is often because of particular circumstances such as looking after young children or someone who is sick. We believe that people rarely do that for substantial portions of their working life. Our other reforms, especially the 30-year contribution test and carer's credits, will in any case benefit many who have a particular need for these types of flexible work patterns.
	People whose earnings are below the lower earnings limit do not necessarily fall through the system; they may be building a state pension from home responsibilities protection or national insurance credits, from carer's credits or working tax credits. It is right to say that the analysis of the Labour Force Survey indicates that, at any one time, about 15,000 women are earning more than the lower earnings limit in total from two or more jobs which individually pay less than that amount and are not accruing a basic state pension. We do not believe that these people necessarily stay in those circumstances throughout their working life. I was interested in the example touched on by my noble friend Lady Hollis. If I understood it, she was talking about a number of jobs that were in sequence, not jobs that were combined at the same time. We believe that only one in 1,000 women of working age is in this group who are currently earning in total less than the lower earnings limit from two or more jobs.
	The Pensions Commission concluded that it is difficult to fix the aggregation issue within the confines of the existing system or without significantly increasing costs for employers. We have looked closely at the issue of aggregation and we agree with the Pensions Commission. There is no straightforward mechanism to allow earnings from multiple employers to be aggregated. To do so would fail the tests of simplicity and affordability.
	I know that supporters of the aggregation argument have drawn a comparison with arrangements for working tax credits—my noble friend did so a moment ago—where earnings from two or more low-paid part-time jobs are aggregated for tax credit purposes, but the two systems work in very different ways. Tax credits entitlement is calculated on an annual basis, initially on income in the last complete tax year before the claim, with the award being finalised after the end of the tax year in which the claim is made.
	The national insurance contributions scheme, by contrast, works on a set of clearly defined rules with liability arising in each pay period rather than on an annual basis. This is very much a real time issue. If the scheme is amended to suit particular groups it would quickly become unworkable and extremely expensive to administer, failing the test of simplicity and affordability. We would not want a system to aggregate earnings for benefit purposes but which would exempt people from paying national insurance contributions on those aggregated earnings. This would clearly fail the test of fairness. One of the key principles of national insurance is that both the employee and their employer contribute towards the National Insurance Fund. If the employee alone were to contribute, then the amount of payment needed might be prohibitive. The employer contribution helps fund benefit entitlements in both the shorter and longer terms.
	If earnings were aggregated, it is not immediately obvious how the employer's contribution could be easily calculated. The employer's contribution would be variable—a percentage, based on an employee's earnings. Reporting, collecting and calculating it would impose significant administrative burdens on the employer and increase complexity within the system. These burdens would fall particularly hard on small employers.

Baroness Hollis of Heigham: I wonder whether my noble friend can help me. He is saying that whatever we do for employees must apply to employers as well, that we cannot separate the two and that we need both the contributions to run in parallel. How does he connect that to the previous argument we had on people working over the age of 60 where employers continue to pay national insurance but employees will not be allowed to pay national insurance contributions when they are past formal retirement age? We make a disjunction in that case, why can we not make a disjunction in this one?

Lord McKenzie of Luton: That is a separate issue. We have debated how that works. We are dealing here with situations where people are in employment. The argument is about aggregating those employments so that people become eligible to get credits for the basic state pension and S2P. We must have fairness between people who have one job which is above the limit and those who have two jobs which together are above the limit. We believe that in each case the employer and the employee should be put in the same position.
	These burdens might also make the cost of hiring someone uncertain. The employer would not necessarily know about other jobs the individual might have, and therefore whether they would need to pay some employer's national insurance contributions. Some small employers, offering just a few hours work a week, might be reluctant to employ anyone who had another job, which would make it more difficult for people, particularly women, to find part-time jobs which would fit around their other commitments.
	Were it to be possible to collect national insurance contributions on the aggregated earnings, some people could actually be worse off than they are now. We need to be mindful of that. More of the women who are earning more than the LEL in aggregate, but are not now paying contributions, are accruing state pension by other means than the 15,000 who are not. We believe that some 20,000 women are involved. It would not be possible to treat the two groups differently. All these women would have to pay contributions if they earned more than £100 a week, and 20,000 of them would already be accruing entitlement to the basic state pension.
	It is right that we should try to understand who will be retiring without a full basic state pension, and what the circumstances are that have led to that situation before we bring forward proposals to solve a diminishing problem. That is exactly why we are undertaking research to establish more information about those who do not qualify for the full basic state pension. Indeed we are going further than that and are looking also at those who will retire in 2025. We hope to publish the results of this research in summer 2007.
	It would not be appropriate for the Secretary of State to propose a solution on aggregation until we have the results of ongoing work to analyse the full non-accruals picture and the relationship between low earners and the tax and NICs systems. I therefore urge the noble Baroness to withdraw the amendment.

Baroness Thomas of Winchester: I thank everyone who has spoken in this debate. I had three on my side, and the Minister had just one on his.

Noble Lords: Division!

Baroness Thomas of Winchester: The only reason we are moving these various amendments is that this problem is very high up on the agenda of the NGOs that write to us, which means that there is a real problem. The noble Baroness, Lady Hollis, gave us a real life example, and she said that various ways had been put forward today to try to help women with a jigsaw of employment. I am glad to hear about the research, which could be very useful. In the mean time, I shall read what the Minister said. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Skelmersdale: moved Amendment No. 32:
	After Clause 13, insert the following new Clause—
	"Report on longevity
	( ) Beginning in April 2014, the Government Actuary shall present a report to Parliament every five years setting out the latest evidence on trends in longevity."

Lord Skelmersdale: Briefly, this is a simple amendment that seeks to set up a means by which longevity and the consequences of any changes to longevity are monitored, so that any necessary changes to pensions can be made well in advance of their implementation. It seeks to ensure that we are never again taken by surprise about just how much money will be needed to support people through their retirement.
	When the Conservative Government decided that working habits and lifestyle changes made it appropriate for women to retire at the same time as men, we were able to give a lead time of 20 years, which was plenty of time for people to adjust their expectations and plans to ensure that retirement would be suitably covered. I am glad that the Bill also gives adequate time for people to adjust; such changes to the pension system certainly should not be sprung on people.
	In hindsight, it seems quite extraordinary that no one, not even actuaries, realised the effect that such a dramatic increase in life expectancy would have on pension costs. It may seem almost unfeasible that the same mistake could be made again, and yet such an effect was not predicted and such a mistake was made. The amendment seeks to make sure that it will not happen again, and I hope that the noble Lord will consider it with great care. I beg to move.

Lord Oakeshott of Seagrove Bay: This is a good amendment, and we support it.

Baroness Hollis of Heigham: This is a good amendment, and I support it.

Baroness Morgan of Drefelin: Noble Lords will be delighted to hear that I support the general principle of the amendment, which is that trends in longevity need to be kept under review.
	We are not lacking in reports on longevity trends already. As the noble Lord is no doubt aware, the Government Actuary currently has a statutory responsibility to produce a report, every five years, on the long-term health of the National Insurance Fund. Demographic projections are the starting point of that report. The next quinquennial review is due by 2008. At the beginning of last year, the Office for National Statistics took over responsibility for producing national demographic projections from the GAD. The ONS regularly produces reports on longevity trends, not only at the national level but in relation to matters such as trends in healthy life expectancy, and life expectancy by different regions of the UK. I have no doubt that this work, which is of crucial importance not just for pensions policy but for a wide range of public provision, will continue under the auspices of the independent Statistics Board set up by virtue of the Statistics and Registration Service Bill, which is currently before this House.
	I must question, therefore, why we need to place another statutory requirement on the Government Actuary to produce a report that will replicate much, if not all, of the material that is already in the public domain. The amendment would effectively require Parliament to consider the timetable for increasing the state pension age every five years in the light of such longevity data. As we all know, past projections on longevity have been shown to be fallible, as the noble Lord, Lord Skelmersdale, suggested. The trend in recent years has been for projections to be too pessimistic. But more recently, some commentators have questioned whether, in contrast, the current projections might be over-optimistic by not taking account of rising levels of conditions such as obesity. We recognise that the projections of life expectancy on which the timetable for increasing the state pension age is based may change in the future.
	As we set out in the White Paper, it is our intention to commission periodic reviews which will examine, among other things, trends in longevity. Following such a review, it would then be for the Government of the day to decide what, if any, action to take. That could include bringing forward new legislation to amend the timetable.
	I suspect that one of the objectives of the amendment is to precipitate a statement on precisely how and when we intend to carry out those reviews, but I will not do that today and I will explain why. We believe that the first priority should be to ensure that any such review has at its disposal a first-class evidence base that it can draw on. As I have said, significant data relating to life expectancy already exists, but as the Pensions Commission's analysis made clear, there are a number of gaps, not least in relation to trends in life expectancy of different groups in society, which we have just discussed.
	The ONS longitudinal study provides useful data, but it has its limitations. As your Lordships may be aware, there are at present no published projections of life expectancy by social class, nor by local authority area. We will be consulting a range of stakeholders on what evidence needs to be monitored, including where there may be gaps or deficiencies in the existing data. This consultation is imminent; the first of three workshops will take place this week on 7 June. We will then set out our strategy for how we intend to build and maintain that evidence base. We will need to define the terms and timing of the periodic reviews in due course, but a review in 2014, as envisaged by this amendment, would be premature. Changes in life expectancy trends take time to feed through into the projections. Furthermore, it would be sensible to make sure an emerging trend was just that, rather than just a blip. It is undoubtedly true that certainty around the projections decreases the further ahead we look; but it is fair to say that it would take a fairly major event to cause a significant shift in the projections for the 2020s.
	That brings me to my third point. It is important that people know when to expect to get their state pension, so that they are able to plan for their retirement. Re-opening the question of the state pension age every five years would undermine confidence and create widespread uncertainty about any future Government's intentions.
	I hope that the information I have provided regarding the development of a strategy for evidence gathering can offer reassurance to the noble Lord and that he will consider withdrawing the amendment.

Lord Skelmersdale: It is all very well having regular reports from the Government Actuary, but he has been no more infallible and no more perfect than any other actuary. If he had been, we would not have needed nine-tenths of the Pensions Commission of noble Lord, Lord Turner. I am afraid that I do not take the noble Baroness's point to heart.
	If I had not recognised the necessity for a long-term look, I would have put down an amendment stating "every year". I do not wish to do that, because it would clearly be inappropriate. I will cogitate on what the noble Baroness has said and it may be that 10 years is a more appropriate period than five years; but a report on longevity that Parliament can discuss at stated intervals is vital. This is clearly not the moment to pursue that thought. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Hollis of Heigham: moved Amendment No. 33:
	After Clause 13, insert the following new Clause—
	"Record keeping for future payment on residency basis
	The Secretary of State shall by order make provision for the secure and permanent storage of relevant data held on the Electoral Register or any additional or alternative database for the purpose of enabling the possible future payment of a basic state pension on the basis of residency in the United Kingdom."

Baroness Hollis of Heigham: I am sure that it is completely out of order to say how sorry I am that my noble friend Lady Turner is sitting at the Table as opposed to sitting on these Benches for consideration of the amendment. It seeks to establish a record of residency so that a future Government could, if they wished—and it is entirely discretionary—move to a universal basic state pension. Why? The amendments that we have discussed today seem to show why we need such a universal system. We have been producing half a dozen ways in which to bring within the national insurance contributory system excluded groups—mainly women—whose work and contribution we all value but cannot count. However, they remain outside, whether they are grandparents, people working past the age of 60, people in multiple jobs or those below the lower earnings limit and so on.
	At the moment, some 30 per cent of women enter retirement with a full basic state pension either on their own or their husband's record. As home responsibilities protection works its way through, that figure will be 50 per cent by 2010 and, given the change in the 30-year rule, eventually between 70 and 75 per cent. If government statistics are reliable—I am not entirely confident that they can be—by 2030 we will have something like 90 per cent or so coverage for women, as it is for men.
	I suggest to the Committee that the question that then arises is: why have a rule for contributions that does not fit half the population and then keep bending the rules because it is unfair to keep that half out? If the Government are correct in saying that we will have 90 to 95 per cent coverage, why bother? Why should we send people through hoops and hurdles unnecessarily? But if the Government are wrong and the coverage is less extensive, we will have to revisit the rules and bend them yet again because people must live on something. Alternatively, means-testing and the pension credit guarantee could be extended.
	In my view, the appropriate response is a universal basic state pension based on residency—a position arrived at in the report of the noble Lord, Lord Turner. He favoured forward accruals on the ground that establishing past residency, or looking backwards, was difficult, and he wanted a universal BSP for those over the age of 75.
	The amendment is in two parts. The first part says that the Government are required to hold and retain the database, and the second part says that they may—not "must"—use it for a universal residency BSP in years to come. The Government may say, "We don't believe in a universal basic state pension, so why should we start to build up such a database?". My amendment is about keeping the options open rather than closing them down. In 15 or 25 years' time, a very different Government with very different views on cleaning up the mess of the benefits system—and a mess it is—may want to do precisely that. If we do not start, we can never do it. Not keeping the records does not keep our options open; it closes them down, and that is never good public policy. Therefore, in this amendment I am bidding for future flexibility, future options and future choice for whatever Government of whatever political complexion may be in power.
	The question that then arises is whether the amendment is sensible, realistic, workable, cost-free and hassle-free. I believe that the answer is yes. How do we establish residency? I accept that we need a record of residency so that Manuel from Spain, who is here for two years, for example, does not acquire a BSP for life. We may think that 15 or 25 years of residency is appropriate, but could we have a nil-cost and workable database to establish that over time? Actually, we could: it is called the electoral roll. The latest annual report from the Electoral Commission shows that, of people of working age over 45—our target group—who have not moved house in the past 12 months, between 97 and 98 per cent are on the electoral roll. I am told that the amount of churning is very small in this group. Those missing are likely to be second-home owners—those who are wintering in Malta but can none the less register on a rolling basis as and when necessary, or those few who, for whatever reason, do not want to be found. So we have the coverage: 97 to 98 per cent of our target group.
	Can we keep the records? Yes, we can. Electoral registration officers are already required by law to keep the electoral register for 15 years, so expat voters, for example, can establish the right to vote in the UK. Therefore, 15 years of electoral roll residency evidence is already held by local authorities. Can we use those records? The current usage is governed by the Representation of the People (England and Wales) Regulations 2001, which was a response to Mr Robertson's court case when he objected to Wakefield Council selling the electoral register with his name on it to Reader's Digest. The courts held that the unexpurgated register may not be used for non-electoral purposes except by specific regulation. That is fine, but since then we have had two sets of regulations, in 2002 and 2006, which list who may legally have the unexpurgated register and use it. That includes libraries, the police, political parties and candidates. Who is empowered? It may be used in the fight against crime, in the name of national security, by the Home Office, and for vetting employment.
	Beyond that, local authorities are legally able and in some cases required to sell, under the regulations, their unexpurgated registers to the Financial Services Authority, to the Environment Agency and to credit reference agencies, such as Experian and Expedia. The chief executive of the electoral officers' association has told me—he authorised me to quote him—that all that is necessary, in addition to the regulations, is a regulation empowering the register to be used for such pension purposes. It is simple. We had such regulations in 2002 and again in 2006 and we can do it again if we so choose.
	So the electoral register provides almost complete coverage. It is already retained for 15 years. If we were brave, we could probably introduce a universal BSP in the next five years. The information is already made available to the FSA and to credit reference agencies. In the course of the dozens of regulations that we shall receive over the next year or so in this House as a result of the Bill, all that is needed is an additional one, permitting this use. That is all. I am sure that my noble friend will not argue that as a society we can use the electoral roll to establish residency for a hire-purchase agreement for a car but that we cannot possibly use it to establish residency for a basic state pension.
	I repeat that this amendment would not commit any Government to introduce regulations making it possible to introduce a universal BSP, but it would give any future Government the choice to do so; they would not be able to make that choice unless we put such a power into the Bill. I believe that the amendment is desirable for wider reasons, which we have argued about in relation to the contributory principle. We do not want any more tweaks to an over-tweaked system if we can help it.
	This is certainly workable because it already works. One amendment and it would be legal and its costs would be nil. I hope that such an amendment will, in due course, have the support of the Government and, if necessary, of the entire House. It is the only way by which the option will be left open for future Governments to change the structure, should they wish. The amendment requires only that the data be held for that purpose—not that it must be used but that it may be used. I think that the Government have an obligation to keep that choice open for Governments who come later. I beg to move.

Lord Oakeshott of Seagrove Bay: This is a very good amendment, which we strongly support. That is why I put my name to it. Probing amendments are often tabled, but this is different: it is an enabling amendment. In that sense, the noble Baroness has made the case for it very well. We on these Benches are officially in favour of a citizen's pension. Who knows how the politics of this country will develop over the next few years? In recent years, as Secretaries of State for Work and Pensions went in and out of the rotating door, there was a period when the likelihood of a citizen's pension was fairly close, even with this Government. Given how things can change, the amendment seems very sensible. There would be nil cost and it is a very obvious measure to pass. We support it very strongly indeed.

Lord McKenzie of Luton: Amendment No. 33 proposes that we provide for a possible move to pay a basic state pension on the basis of residency at some time in the future, and Amendment No. 169 commences that provision once the Bill receives Royal Assent. I am not surprised to see these amendments tabled in the name of my noble friend Lady Hollis. She has been a tireless campaigner for the improvement of women's pension outcomes, and I take this opportunity to thank her for her continuing involvement in the debate. She has made clear that she believes that a residency-based pension is the best way to ensure that women receive adequate state pension outcomes in the long term. Other noble Lords, including the noble Lord, Lord Oakeshott, in particular, have also expressed that view, so this amendment gives us a further opportunity to discuss the issue and, in doing so, to discuss how the Government's reforms address that point.
	I remind the Committee of the proposals made by the Pensions Commission, led by the noble Lord, Lord Turner, on the future of the basic state pension. The commission proposed that a residency-based pension should be introduced on a forward accruals basis from 2010. However, the Pensions Commission believed that it would be hard, if not impossible, to apply a residency approach retrospectively, so proposed the introduction of a residence test for new accruals only, which the amendment acknowledges. In making the case for replacing the contributory system with a universal pension payable to all individuals who meet a residency test, the commission also acknowledged that there are important arguments against taking that approach.
	I start by making clear that the main objection to a residency approach is one of principle. The Government believe that pension entitlement should be a reward for a lifetime of paid work, parenting or caring—in short, providing something for something. Using residency as the basis of entitlement for a pension would provide the same reward regardless of the social or economic contribution made by an individual. Our reforms modernise the contributory principle so that it continues to be relevant, but it remains at the heart of this Government's approach, and we believe that it strikes the right balance of rights and responsibilities between the individual and the state.
	Nevertheless, reform in the state pension system so that women and carers receive fair outcomes has been a key objective of our pension reforms. A residency-based pension is often supported on the grounds of this objective, the argument being that entitlement built on residency would produce fairer outcomes than paid or unpaid contributions that women may find harder to build up than men. However, a comparison of the approaches suggested by the Pensions Commission and the Government shows that our reforms will deliver improved outcomes for women and carers faster than they would be delivered by the introduction of a residency-based pension for new accruals from 2012. Our reforms will see the proportion of women reaching state pension age in 2012 with entitlement to a full basic state pension rise significantly to around three-quarters, compared to around half without reform. Most commentators have acknowledged and welcomed the significantly improved outcomes that will be delivered faster by the Government's reforms. However, supporters of residency still argue that it would be a fairer and more relevant way to determine state pension entitlement than a contributory system.
	There are some further key objections to this approach. A residency-based pension would not necessarily be simpler to administer, nor would it necessarily provide a more universal pension. There is no unequivocal definition or single set of rules used to determine residency. Different social security benefits have different definitions and rules, and different government departments operate specific rules to determine residency for specific purposes—for example, HMRC for tax collection. Therefore, we would first have to agree on a workable and fair definition of residency before determining what information might be relevant and finding a way to obtain it. We do not hold records on residence beyond those existing under the current tax and benefit system. Furthermore, we know that there are gaps in the coverage of the existing information systems, so we would have to identify additional information to help confirm and record residency. The DWP could not do that on its own, but would need to work with other departments and organisations. There are no residency records in the UK to underpin the policy of a residency-based basic state pension. We do not believe that there is any effective proxy for residency information.
	Arriving at a unified definition of residency and solving the problem of sharing information across these different rules and organisations would not be a simple matter. For example, would residency be based on physical presence? If so, what would be the position of individuals seconded to work abroad for their employer for a period? What about diplomats posted around the world, service personnel serving abroad for their country or individuals who wanted to work, say, in Africa under some voluntary service overseas? Would they have their pension restricted? What would be the circumstances of missionaries working abroad?
	The amendment is obviously intended to allow time for the consideration of these issues in order to move to a residency approach at some future date. But time would not necessarily deliver a solution to the problem of finding a workable definition of residency that delivered outcomes comparable with those under the proposed reform system. If information is to be managed for this purpose, we would need to know what would be the definition of residency and what information would be required to support this. We would need to legislate for this information to be collected for the specific purpose of defining the entitlement to the basic state pension on the basis of residency.
	The amendment would have no practical effect unless these provisions were decided. Ultimately, a residence-based approach to provide the state pension would require a new system or processes for collecting and recording information, yet we would still have to run the existing systems in parallel with any new system and continue to collect the information we already collect for current business requirements. A residency approach would not deliver a universal pension or something more closely resembling it than the system that would be delivered under our reforms. Such a residence-based system would still need a test for eligibility. Some people would fail this test. Too long a residency requirement could prove difficult for some to meet, while too short a test could compromise security and affordability.
	My noble friend made reference to the electoral register as a means of recording data for a residency pension. The electoral register has been suggested for the purpose. There are currently no residency records to support such an approach and no effective proxy for residents' information. It is not clear that the data from the electoral register would meet this requirement. A number of legal issues arise when considering using this or other data sources for this purpose. Personal information, such as that on the register, may be supplied only so far as the law allows it to be supplied. Similarly, the department's ability to retain and use information it obtains is prescribed by law.
	The amendment would require relevant data to be stored for the purpose of determining residency, but we would first need to have legislative gateways in place to collect this information for this specific use.
	In the case of data from the electoral register, there is no central register. Each local authority holds its own individual register. If this information were to be used, the Secretary of State would require a power to receive information from all 408 registers, and to be informed of any changes in the information held.
	Furthermore, the usefulness of this information is questionable in the case of the publicly available register because residents can opt out of providing their details, so it would not necessarily contain the details of everyone in the local area. The electoral register does not provide a unique identifier for individuals, so even if it could be matched against other data sources, it is not certain that the specific individual could be found and their identity and residence history confirmed. The register could contain the names of individuals, their gender and age, but only that.
	The key thing to remember is that the electoral register provides evidence of a person's eligibility to vote, not of residence. It may indicate that somebody lives at a particular address, but it cannot be used on its own to confirm this or to tell us how long that individual has lived there. Indeed, one could be on the register for a period when the register is drawn up and then go and live in Bermuda for 10 months of the year. It would still not provide an adequate proxy for residence information.
	This debate will continue. I look forward to further opportunities to discuss the matter, but I do not believe that the amendment is the right way in which to go, and ask the noble Baroness to withdraw it.

Baroness Hollis of Heigham: The first half of the Minister's speech was actually arguing against a different amendment from the one that I moved. It was as though I was suggesting that we establish a universal basic state pension. I happen to support that, but that is not what the amendment says. Indeed, I was at some pains to say that that was not what I was arguing for. I was arguing for an enabling amendment—to use the phrase of the noble Lord, Lord Oakeshott—to make use, by regulation, of existing databases, so that a future Government can, if they wish, explore the issues carefully and thoughtfully raised by my noble friend and decide whether they wish to go down that route. The point that I am making and that Turner made, which seems to be unanswerable, is that if you do not start, you can never do it. That is the point; we must try to ensure that we do not close down future options.
	The Minister made much of the fact that he objects to the principle of residency as a basis but, as I said, that is not what the amendment seeks to do. It seeks merely to establish that a future Government of whatever party, or indeed a different Secretary of State who might have a very different view—I served under one who did—could make that choice if they so wished. I am not asking the Government to introduce residency; I am asking them to make it possible for a future Government to do so, if they so wished.
	The Minister's second argument—I absolutely respect the detailed points—was about simplicity. I listened carefully to him, and I will read Hansard very carefully, but I do not think that any of the points that he made were a roadblock, as the jargon goes in the Civil Service. I could suggest a way of addressing almost every one of them, although obviously one would need to push it forward. Now is clearly not the time to do so—we would need workable definitions and so on—but we have a database. We do not have to hold the database; local authorities do. The notion that the DWP cannot collect data from all 400 of them is unfounded; the Home Office does, as do the Environment Agency, the Financial Services Authority and the credit reference agencies. I cannot believe that the DWP, with its 130,000 civil servants, cannot do the same. That seems improbable.
	The Minister talked about legal issues and how much the law allows. That is the point that I made. We would need a regulatory power, because the electoral register cannot be used following the Robinson judgment in the Wakefield case, except by specific regulation for non-electoral purposes, so having a regulatory power would be the only adjustment that would have to be made. I am afraid that I do not accept the Minister's argument. He argues as though I am seeking to introduce this tomorrow or the day after, or a commitment to do so. I am not; I am trying simply to ensure that it could happen.

Lord McKenzie of Luton: I accept that point, but unless one is clear about the rules for residency that one is going to apply, how can one know what data one is going to collect? That is why one needs to understand the system that one is suggesting could be introduced. Until one does that, one simply collects every piece of information in the world. One might want to use it at some stage in the future, but in any event the electoral register is not a test of residency.

Baroness Hollis of Heigham: If the House supported such an amendment, a regulation would follow in the course of next year, among the other regulations that we have, that would allow the electoral register to be used for this purpose. As the amendment makes clear, there is no reason why, if some of my noble friend's concerns are found to be valid as we explore this in the next five, 10 or 15 years, we cannot cross-check with records of council tax payments and other forms of benefit entitlement of that sort. That can easily be done. All I am saying is that if we accept that a current electoral register with 15 years of records is a workable basis—97 to 98 per cent of working people over the age of 45 who are on the electoral register have not moved house—the only thing that is needed is an amendment to make that legal under the 2001 Act. A future Government may decide to do nothing beyond that in the future. That is up to them, but if we do not make such a move and protect the integrity of that information, no future Government will ever be able to do so. We will have this debate next year and in five, 10 and 15 years' time, and someone will say, "Why don't we clean this mess up? What a pity we do not have an information base on which to do it". That could be the Government or the Opposition, but I am completely confident that that moment will come. My only question is—to paraphrase my noble friend—not when, but how, and not if, but when?
	My noble friend's speech obviously was drafted before the arguments could be explored in detail. I shall reflect on what my noble friend said and I hope that he will reflect on what has been said tonight about the capacity we already have and the need to protect that capacity to keep options open for future Governments who may wish to make decisions, with which my noble friend may disagree, but which others may want to see happen. Going down that path is the only way to ensure that all women will get the pension to which they are entitled. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.
	[Amendments Nos. 34 and 35 not moved.]
	Schedule 3 agreed to.
	Schedule 1 [State pension: consequential and related amendments]:

Lord McKenzie of Luton: moved Amendment No. 36:
	Schedule 1, page 31, leave out lines 29 to 32 and insert—
	"(a) in paragraph 5 (Category A or B retirement pension) for the figure in column (3) (increase for adult dependant) substitute "—"; (b) in paragraph 6 (Category C retirement pension) for the figure in column (3) (increase for adult dependant) substitute "—"."

Lord McKenzie of Luton: I shall speak also to Amendments Nos. 37 and 145. These are three straightforward corrections to the drafting of the Bill. On Amendment No. 36, Part 4 of Schedule 1 provides for the consequential amendments to the abolition of adult dependency increases in category A and category C retirement pensions. At present, paragraph 18 in Part 4 of Schedule 1 refers to the amounts which were payable at the time that the Bill was introduced into Parliament in 2006. These amounts have since changed, meaning that paragraph 18 is now obsolete. The intention now is to make the consequential amendment by reference to the specific item in the Schedule to the Social Security Contributions and Benefits Act 1992, rather than to continue to quote the amounts payable. This will ensure that the proposed changes will be able to come into effect from April 2010.
	On Amendment No. 37, part 5 of Schedule 1 contains consequential and related amendments that fall from the new earnings uprating provisions of Clause 5. Paragraph 27 concerns amendments to Section 159C of the Social Security Administration Act 1992, which allows for the amount of an unemployment and support allowance to be recalculated when benefits are uprated without the need for a further decision. The amendments at paragraph 27 ensure that this will also apply where that calculation takes account of amounts which are earnings uprated under new Section 150A, as well as those which are prices uprated under Section 150. However, we have subsequently identified that a further small change is required to Section 159C to insert a further reference to new Section 150A. Therefore, this government amendment does exactly that.
	Finally, Amendment No. 145 simply tidies up previous legislation to reflect the new arrangements for the state second pension introduced in this Bill. These new arrangements, which are introduced at Clauses 10 to 12, will greatly simplify the state second pension and slowly erode its earnings-related element as recommended by the Pensions Commission. This amendment concerns that part of the Child Support, Pensions and Social Security Act 2000 which describes how inherited state second pension is calculated when someone in receipt of bereavement allowance reaches state pension age. The particular legislation at issue here is that which modifies the number of years of a working life.
	Following the introduction of the flat and fixed rate amount of state second pension, which is a key part of the simplification we are proposing, the reference to the number of years in a working life becomes redundant. Schedule 7 lists the repeals and revocations necessary to make the new legislation operate effectively. Part 4 lists the repeals required to make the simplified accrual rate in state second pension work. This amendment includes a further reference which was overlooked at the first stage of the Bill. I beg to move.

On Question, amendment agreed to.

Lord McKenzie of Luton: moved Amendment No. 37:
	Schedule 1, page 32, line 38, after "allowance)" insert—
	"(a) in subsection (4) (application of subsection (5)) in paragraph (a), after "150" insert ", 150A"; (b) "
	On Question, amendment agreed to.
	Schedule 1, as amended, agreed to.
	Clause 14 [Conversion of guaranteed minimum pensions]:

Baroness Noakes: moved Amendment No. 38:
	Clause 14, page 14, line 36, leave out "if" and insert "in respect of an earner in relation to whom"

Baroness Noakes: I shall speak also to Amendment No. 39. This is the first of a short series of amendments which have been suggested to us by the Law Society of Scotland, which I generally regard as providing sensible technical amendments to Bills. These amendments are probing in nature. If the Minister rejects them, which I anticipate he will because that is generally what officials tell Ministers to do, I shall want to consult the Law Society of Scotland in the light of his response.
	The two amendments in this group amend new subsections (1A) to be added to Sections 13 and 17 of the Pension Schemes Act 1993 by Clause 14 of this Bill. The new subsections allow schemes to be amended so that they do not have to pay guaranteed minimum pensions if the conditions specified in Section 24B are satisfied. The Law Society of Scotland wants this condition to be replaced with the words,
	"in respect of an earner in relation to whom ... the conditions specified in section 24B are satisfied".
	The crucial difference between the two formulations is that the Bill implies that the conditions must apply to all earners, whereas the amendment suggested by the Law Society of Scotland makes it explicit that the conditions need not apply to all earners within the scheme. I beg to move.

Lord McKenzie of Luton: I thank the noble Baroness, Lady Noakes, for the series of amendments she has tabled. Perhaps I should say up front that given their source, we knew they would be probing but focused on technical matters. Although I believe that what is intended by all of them, apart from one, is covered by the legislation, it might be fruitful for us to organise a meeting between now and the Report stage, perhaps together with the Law Society of Scotland and officials, to go through the position in detail. I do not believe that these amendments are necessary and I hope that I can set the noble Baroness's mind at rest as I address each in turn.
	These two amendments specify that it is the GMP provision in respect of earners and survivors whose GMPs are being converted which may be omitted from the provisions of the scheme. However, I can assure the noble Baroness that this is already the effect of the clause. As it stands, it inserts a subsection into Sections 13 and 17 of the Pension Schemes Act disapplying them where GMP conversion has occurred. As Sections 13 and 17 apply to individuals rather than to schemes, it follows that the inserted sections on GMP conversion will equally apply to individuals only.
	I hope that that shorthand response explains the situation, but, as I say, we ought to hold a meeting to go over the detail.

Baroness Noakes: The Minister's explanation sounds plausible and I shall await discussions with the Law Society of Scotland. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.
	[Amendment No. 39 not moved.]

Baroness Noakes: moved Amendment No. 40:
	Clause 14, page 15, line 23, at end insert "in respect of rights accrued before the conversion date"

Baroness Noakes: Amendment No. 40 is another probing amendment which amends paragraph (e) of new Section 24A of the Pension Schemes Act. The paragraph currently states that "post-conversion benefits" are,
	"benefits provided under the scheme immediately before the conversion date (disregarding money purchase benefits)".
	My amendment qualifies the benefits by saying that they are to be,
	"in respect of rights accrued before the conversion date".
	Condition 3 set out in new Section 24B states that,
	"post-conversion benefits must not include money purchase benefits, apart from [those] provided under the scheme immediately before the conversion date".
	The Law Society of Scotland believes that this might be read as preventing money purchase benefits in respect of future service. Since the purpose of Clause 14 is to allow some flexibility in respect of benefits which ceased to accrue in 1997, I am sure the Minister will agree that the clause should have no effect on the way that pension rights are delivered in respect of future service. I beg to move.

Lord McKenzie of Luton: As the noble Baroness has explained, this amendment is intended to address the concern that, as the definition of post-conversion benefits stands, it might not permit the accrual of money purchase benefits after the conversion had occurred. This would obviously not be an outcome which we intended. However, for the reasons I shall give, we do not believe that that is the effect of the current wording of the definition. This clause is about the conversion of the GMP into scheme benefits of the same actuarial value. The GMP accrued from 1978 to 1997 and therefore the proposed legislation cannot by definition have an impact on post-1997 accruals. By excluding money purchase benefits from the definition of "post-conversion benefits" and, indeed, from the definition of "pre-conversion benefits" as well, we are preventing a scheme from including any such benefits an individual accrued during the GMP period from the conversion calculations. We are not stopping anyone from accruing post-1997 rights in their scheme, of whatever type.
	I trust that that is the reassurance the noble Baroness seeks.

Baroness Noakes: That is indeed the reassurance we were seeking. We shall have to read Hansard carefully to ensure that what the Minister has said actually stacks up. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Noakes: moved Amendment No. 41:
	Clause 14, page 16, line 16, leave out "employment" and insert "pensionable service"

Baroness Noakes: The two amendments in this group relate to new Section 24D, which is inserted by Clause 14. The new section relates to survivors' benefits which must be provided by a scheme which converts guaranteed minimum pensions. These are calibrated in Section 24D by reference to "employment" during the period that the GMP accrued. The Law Society of Scotland believes that this should relate to "pensionable service" rather than "employment" during the relevant period and the two amendments seek to make that change. A person could have been employed during the relevant period yet his service need not have been pensionable, for example, because the individual had not joined the pension scheme at the outset of his employment. These amendments are designed to clarify that. I beg to move.

Lord McKenzie of Luton: With respect to these two amendments, it is understandable that one might think that rights to GMPs in these occupational pension schemes derive from "pensionable" service and that this might be a more appropriate term to use in the legislation. However, we are dealing here, by definition, with contracted-out schemes. In these schemes, members derive rights from undertaking employment which is "contracted out" from the state second pension provisions.
	Due to the nature of the legal status of this employment and to the link with lower-rate contracted-out national insurance contributions which are payable by both employer and employee, the contracting-out legislation uses the term "employment" rather than "pensionable service". Similarly, the legislation refers to "earner" rather than "member". Therefore, while understandable in their intention, the proposed amendments do not fit with the legislation already in existence.
	Again I believe that we are at one in what we think should apply. I hope that explanation has given the noble Baroness some reassurance.

Baroness Noakes: That has been very helpful. The debate reminds me of the time when I learnt accountancy and it was described as a hieratic language; a priestly language understood by very few. It appears that pension-speak is much the same. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.
	[Amendment No. 42 not moved.]

Baroness Noakes: moved Amendment No. 43:
	Clause 14, page 16, leave out lines 30 and 31

Baroness Noakes: Amendment No. 43 seeks to delete subsection (2) of the new Section 24E inserted by Clause 14. Again, this is on a probing basis.
	One of the procedural requirements for conversion of graduated minimum pensions is the consent, in advance, by the employer. The Law Society of Scotland has pointed out that since actuarial equivalence is required by new Section 24C it ought to be immaterial to the employer whether or not conversion takes place and without the requirement for consent it would be left to the trustees to determine.
	If this is not a sufficient argument for the Minister, I invite him to consider the case of schemes in wind up with deferred pensioners. If the employer no longer exists, how can consent be obtained? Does this rule out the trustees of such a scheme carrying out a conversion?
	I am aware that subsection (4) of new Section 24G allows the trustees of a scheme in wind up to adjust rights as if the scheme had been converted, but I am unclear whether this means that the trustees in a wind up can then ignore all of the procedural requirements in new Section 24E, which includes consent. I trust that the Minister can shed some light on this. I beg to move.

Lord McKenzie of Luton: This is one of the amendments where we take a different view as to the role of the employer. The amendment seeks to make a significant change to the conditions under which a scheme may convert its GMP liabilities into normal scheme benefits. It would remove the requirement for trustees of the scheme to obtain the consent of the scheme's sponsoring employer before proceeding with proposals for GMP conversion.
	At first glance one might think that actuarial equivalence would produce a no-cost result and therefore the employer has no interest in the matter. However, it is important to recognise that GMP conversion will incur immediate administration costs and possibly some benefit costs as well, depending on how the scheme is restructured. We should also remember that the employer will have entered into sponsorship of a good-quality occupational scheme on an entirely voluntary basis. All costs of the scheme are ultimately brought to bear on the sponsoring employer, and we believe it is essential that GMP conversion should go ahead only where the employer is satisfied with the proposed arrangements. However, I am conscious that that reply deals only with part of the point that has been raised and does not specifically address the issue of schemes that are in wind-up. If I may, I will reflect on what the noble Baroness said and write specifically on that, because I realise that I have given her an incomplete answer.

Baroness Noakes: I am grateful for the Minister's response. I will consider what he has said today and look forward to his further written thoughts. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Noakes: moved Amendment No. 44:
	Clause 14, page 17, line 8, at end insert—
	"(4) A GMP conversion is deemed to have taken place after an adjustment occurs as specified in subsection (3)."

Baroness Noakes: This is another probing amendment to Clause 14. It adds a new subsection to new Section 24F of the 1993 Pensions Act, which deals with regulations in respect of transfers out. Under subsection (3) the trustees can, when a member seeks to transfer his rights out of a scheme, adjust a guaranteed cash equivalent as if the scheme had been converted. There is no problem with that. However, the Law Society of Scotland points out that the section does not say that that is to be treated as a conversion; indeed, the section seems to consign the member's rights to some form of limbo. The amendment would make it clear that the procedure has the same legal consequences as if conversion had taken place. I beg to move.

Lord McKenzie of Luton: The amendment covers the issues of individual conversion on transfer. Noble Lords will be aware that the restrictions associated with GMPs mean that it can be difficult for a member to transfer his rights to a new scheme of his choice; for example, when starting work with a new employer. New Section 24F(3) provides a facility for a scheme to adjust a member's guaranteed cash equivalent to a transfer value, with his consent, to remove the GMP and avoid these problems. That can apply even though the scheme is not undergoing GMP conversion for its membership generally. This is intended to be an easement providing greater flexibility and choice for individuals.
	The amendment would deem a GMP conversion to have taken place where the provision under new Section 24F(3) is used. We believe that this is already implicit within the draft legislation. I hope that that reassurance will convince the noble Baroness that the amendment is therefore unnecessary. We believe that proper reading of the legislation would say that that is inevitably the position.

Baroness Noakes: I am less clear that relying on something that is implicit is an adequate response to the point raised in the amendment, but I am happy to have discussions on that offline before Report. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Noakes: moved Amendment No. 45:
	Clause 14, page 17, line 29, at end insert—
	"24GA Effect of amendment to the scheme
	The amendment of a scheme in respect of those earners in relation to whom the conditions specified in section 24B are satisfied shall extinguish the earner's accrued rights to guaranteed minimum pensions under that scheme."

Baroness Noakes: The Committee will be relieved to know that this is the last of the amendments that have been suggested to us by the Law Society of Scotland, also in relation to Clause 14. Amendment No. 45 inserts a new Section 24GA into the Pensions Act 1993. The new section says that when a scheme has been amended under these new provisions it has the effect of extinguishing the owner's rights to the guaranteed minimum pension under that scheme. Of course that is what Clause 14 is all about, but it did not appear to say so, so we have tabled the amendment for the avoidance of doubt. I hope the Minister will not simply say to me that it is all implicit. I beg to move.

Lord McKenzie of Luton: The amendment is concerned to ensure that, after GMP conversion, schemes do not find themselves retaining a liability in respect of the GMP. Obviously such an outcome would be quite wrong, as each individual member would already have received full value for their pre-conversion rights, including the GMP, in the award of their post-conversion benefits. One might say that it would be a "double whammy" on the scheme. I am happy to say that the existing draft legislation will not and could not lead to that outcome. The GMP will be converted into ordinary scheme benefits, and the GMP will cease to exist after conversion, making the amendment unnecessary. I hope that is the reassurance the noble Baroness is looking for.

Baroness Noakes: I think that that was a variant on "implicit", but I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord McKenzie of Luton: moved Amendment No. 46:
	Clause 14, page 18, line 37, at end insert—
	"(8) Subsection (9) applies where—
	(a) a person has been in receipt of a guaranteed minimum pension and a Category A or Category B retirement pension,(b) the guaranteed minimum pension has been increased in accordance with section 15(1) of the Pension Schemes Act 1993 (c.48) or the Category A or Category B retirement pension has been increased in accordance with paragraph 5 of Schedule 5 to the SSCBA (increase of pension where commencement of guaranteed minimum pension postponed),(c) the pension scheme under which the guaranteed minimum pension is paid is subject to GMP conversion (within the meaning of section 24A of the Pension Schemes Act 1993 (c.48) inserted by subsection (3) above), and(d) an order under section 150(2) of the Administration Act would have applied to the person in respect of the increase mentioned in paragraph (b) above but for the scheme having been subject to GMP conversion.
	(9) The person's Category A or Category B retirement pension shall be increased by the amount by which it would have increased as a result of the order.
	(10) In section 186 of the Pension Schemes Act 1993 (c.48) (parliamentary control of orders and regulations)—
	(a) before subsection (3)(a) insert—"(a) regulations made under section 24B(5), or",(b) renumber the existing paragraphs of subsection (3), and(c) in subsection (4) for "(a) or (c)" substitute "(b) or (d)"."

Lord McKenzie of Luton: The amendment is to Clause 14, the provision allowing contracted-out defined benefit occupational pension schemes to convert their liability for a guaranteed minimum pension—the GMP—into normal scheme benefits, by way of actuarial equivalence. The amendment covers two different issues, and I shall cover the simpler matter first.
	Subsection (10) requires regulations made under new Section 24B(5) to be subject to the affirmative procedure. Under Clause 14, a scheme may offer any structure of benefits in exchange for the GMP, but it must continue to provide a survivor benefit for a widow, widower and surviving civil partner. This requirement is in proposed new Section 24B(5), which also allows for secondary legislation to lay down the circumstances under which a survivor benefit has to be paid. It is our intention to replicate, as far as is sensible, the current requirements on GMP inheritance.
	It was intended that this secondary legislation would be made under the negative resolution procedure. However, in its report on the Bill, the Delegated Powers and Regulatory Reform Committee has said that it believes that the secondary legislation on this matter should be made by the affirmative procedure. We are pleased to accept the committee's suggestion, which the amendment implements.
	Subsections (8) and (9) cover a rather more complicated issue. They are needed to prevent some people losing money as a result of the conversion of their guaranteed minimum pensions under Clause 14. This is a technical area and, despite the hour, I hope that the Committee will bear with me as I explain.
	Where a person defers taking his guaranteed minimum pension, it is increased. These increases are known as increments and the scheme concerned has partially to index these increments. Once the GMP is in payment, it has to be increased to offer some protection against inflation.
	A similar provision is made on the state additional pension, payable during the GMP period of 1978 to 1997 SERPS. However, with respect to SERPS, the increments are fully, rather than partially, indexed. To prevent someone who was contracted out from being treated less favourably than a person who was contracted in, the difference between the partial indexation on the GMP increments paid by the scheme and the full indexation paid to a person contracted in to SERPS is paid as an increase to the individual's state retirement pension.
	I would like to introduce Members of the Committee to the PUCODI; it sounds like something from "Call My Bluff", but it is the payable uprated contracted-out deduction increment.
	Having explained the background, I can now inform the Committee of the purpose of the amendment. Where a scheme member is in receipt of GMP increments, and the scheme decides to convert his GMP, actuarial equivalence will ensure that he is given the value of those increments as well as the value of the future indexation payable by the scheme. However, without subsections (8) and (9) in the amendment, the individual will lose entitlement to future increases to his PUCODI—the payment from DWP. This is because entitlement to a PUCODI is based on the payment of a GMP and, on conversion, the GMP disappears. These subsections will prevent someone in receipt of a GMP increment from losing future increases to his PUCODI if his scheme decides to convert his GMP into scheme benefits.
	I am conscious that this has been a somewhat long explanation at this time of night for such a short amendment, but I hope that the Committee will see the benefit. I beg to move.

Lord Oakeshott of Seagrove Bay: That was a most impressive performance and I think that it is time the Minister took his PUCODI home to bed with him.

On Question, amendment agreed to.
	Clause 14, as amended, agreed to.

Baroness Noakes: moved Amendment No. 47:
	After Clause 14, insert the following new Clause—
	"Review and alteration of reduced rates of contribution
	(1) Section 42 of the Pension Schemes Act 1993 (c. 48) is amended as follows.
	(2) In subsection (1)—
	(a) in paragraph (a), at end of sub-paragraph (ii) insert "together with his recommendation as to whether there should be an alteration in either or both of those percentages and if so what alteration is required",(b) omit paragraph (b).
	(3) For subsection (3) substitute—
	"(3) If the Secretary of State lays a report under subsection (1) in which the Government Actuary or the Deputy Government Actuary recommends that there should be an alteration in either or both of the percentages mentioned in section 41(1A) and (1B), the Secretary of State shall prepare and lay before each House of Parliament with the report the draft of an order making that alteration; and if the draft is approved by resolution of each House, the Secretary of State shall make the order in the form of the draft."

Baroness Noakes: The amendment would add a new clause after Clause 14. The new clause would amend Section 42 of the Pensions Schemes Act 1993, as subsequently amended.
	Section 42 deals with the review and alteration of contracted out rebates for salary-related occupational pension schemes. Under Section 42(1)(a), at intervals of not more than five years, the Government Actuary has to report on any changes since his last report in the cost of providing actuarially equivalent benefits where schemes are contracted out of the GMP. That report has to be laid before Parliament. Under Section 42(1)(b), the Secretary of State lays another report, this time giving his view, in the light of the Government Actuary's report, as to whether the contracted out rebate percentages should be altered.
	When a private-sector occupational scheme is contracted out, the Government transfer some of their long-term benefits risk. The Government pay for this through the contracted-out rebate. It is clear that the risk and the rebate are intended to be actuarially equivalent, because that is what the Government Actuary is required to report on.
	There would be no problem if the Government accepted the Government Actuary's report or even increased the rebate following representation made by pension providers, but that is not what the Government did last year when the previous contracted-out rebate order was laid. Before the previous order, national insurance contributions were reduced by 5.1 per cent of earnings between the thresholds. The Government Actuary recommended 5.8 per cent. Others represented that the figure should be even higher than that; for example, the National Federation of Pension Funds recommended 8 per cent. What did the Government do? They increased the rebate only very slightly to 5.3 per cent.
	They did not do this on the basis of any actuarial principle, but used what the Minister's predecessor called a "cost-neutral approach". There was no cost neutrality in it at all; it was a blatant move by the Treasury to hang on to as much national insurance contribution income as possible regardless of the fact that the private sector schemes would face yet a further hit. The fig leaf was the fact that the Government were considering the proposals in the report of the Pensions Commission, but they never satisfactorily explained why that meant that they should short-change pension schemes, and therefore employers, yet again.
	It was clear from that episode that the Government could not be trusted to make a rational and principled decision on contracted-out rebates. They ignored the Government Actuary then and would doubtless do so again whenever the Treasury's coffers were under pressure. Accordingly, my amendment would remove the Government's discretion and require the Government to lay an order implementing the Government Actuary's recommendation. If the Government had principled views, they would be able to make them known to the Government Actuary during consultation. Clearly, it would still be open to Parliament to refuse to approve such an order, but I do not think that the Government would seek that outcome.
	Since the Government have chosen to continue with contracting out for defined benefit schemes, it would not be sensible to continue to expose those schemes to decisions on the rebate being taken on non-actuarial grounds. I beg to move.

Lord Oakeshott of Seagrove Bay: We support the amendment. The Government did not behave properly on the previous occasion that this happened. This is yet another example of a situation where it is not right to leave the Government with flexibility.

Lord McKenzie of Luton: I am grateful to the noble Baroness, Lady Noakes, for the chance to address this important issue. The amendment would impose an additional and explicit requirement on the Government Actuary, which, if accepted, would shift much of the responsibility for recommending to Parliament the level of rebate rates for contracted out salary-related schemes from the Secretary of State to the Government Actuary. It may be helpful, therefore, if I explain a little about the legislative provisions that are in place to ensure that the level of rebate is reviewed and subjected to parliamentary scrutiny at least once every five years. These provisions include a requirement for the Secretary of State to lay before each House of Parliament a report which includes a statement about any changes to the existing rebate rates that he considers are needed. The report takes account of the accompanying Government Actuary's report to Parliament, which sets out any changes in the various factors that affect the cost of providing benefits of a value that is broadly equivalent to those given up in the additional state pension. Put simply, the legislation requires that the Secretary of State recommend to each House of Parliament the changes to existing rebate rates that he considers are needed and that this recommendation give due consideration to the report of the Government Actuary.
	This amendment would bind Ministers to accept the recommendation of the Government Actuary and in doing so extend the statutory responsibilities of the Government Actuary. These are currently to provide an independent report to Parliament on the assessment of the cost of providing benefits of an actuarial value equivalent to that of the state benefits forgone by those who are contracting out. As is appropriate to the Government Actuary's role, the report is confined to actuarial matters. The actuary's report is prepared after full public consultation and due consideration of the responses to that consultation. As with all advice from civil servants, Ministers are obliged to give fair consideration and due weight to this informed and impartial report to Parliament. However, as is rightly the case, it is for Ministers to take decisions on the level of rebate in the light of other relevant considerations and advice and it would therefore be inappropriate to fetter ministerial decision-making by removing Ministers' ability to determine the level of the rebate in the light of the broader public policy context and having regard to the prevailing and anticipated fiscal situation. The Government Actuary could not be expected to take a view on such matters on behalf of the Government of the day and it would not be reasonable to expect him to.
	I do not doubt that the noble Baroness is thoroughly convinced by that argument and will happily withdraw her amendment.

Baroness Noakes: Let me be clear: the only reason why I shall withdraw the amendment is because it is 11 o'clock and time that we all went home to bed. The Minister will not expect me to say that I was convinced one jot by that explanation. I think that he can expect to revisit this at Report. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Morgan of Drefelin: I beg to move that the House do now resume.

Moved accordingly, and, on Question, Motion agreed to.
	House resumed.
	House adjourned at 11.02 pm